How To Get A Mortgage Loan When You’re Self-Employed

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How To Get A Mortgage Loan When You’re Self-Employed

Getting a mortgage when you’re self-employed can be a tricky process. In a previous article we discussed the basics of self-employed mortgage loans, including the requirements, interest rates, and loan limits. Here we’ll provide more detail about these specialized mortgages, including what you can do to help ensure approval, and the various options available so you can choose the best home loan for you.

These self-employed mortgage tips and advice can help you buy your dream home! So, let’s dive right in...

How to Be an Ideal Candidate

5 Tips to ensure You Meet Self-Employment Mortgage Qualifications

Lenders will review several areas to determine if you qualify for a self-employed home loan. Because self-employed individuals and those owning small businesses often do not have a set income, lenders consider these loans a higher risk, and therefore the borrower could run into some bumps along the way. But with these five tools in your arsenal, you can be the ideal candidate for a self-employed mortgage loan.

  1. Ensure you have a good self-employment track record - The track record of your small business or working for yourself will be a vital asset to prove to a lender that you know how to manage the finances of your business or your personal income, and that those finances are on an upward trajectory. Begin keeping records from day one of your business or self- employment, so that any and all income you earn is recorded in an official and easy to track method so you can provide them for reference. Items such as articles of incorporation and/or operating agreements may be needed to prove when your self-employment began.
  2. Get your credit score in shape - It is no surprise that lenders want borrowers with a good credit score; the higher the score, the more likely the lender is to receive the agreed upon monthly payments on-time. Bank of England Mortgage offers loans to individuals with credit scores starting at 620 when using tax returns or 660 when using only bank statements or 1099’s to qualify.
  3. Keep proper documentation and records - Don’t let your documentation pile up and become a mess. Begin organizing your files from the beginning to make accessing the requested documents for your lender quick and simple. Lenders will often request bank statements, proof of liquid assets, a FICO credit report, and previous work history. These records can help you meet the self-employment mortgage requirements in a more efficient manner. Lenders can usually exclude liabilities such as auto loans or credit cards that are being paid out of a business account, but will require proof of 12 consecutive payments. Keep all records of debts being paid by your business and be sure to pay with check, wire, or ACH.

If you’re applying for a bank statement mortgage, you will be asked to provide 12 – 24 months of personal or business bank statements. Having these statements stored in one place, and having an understanding of your estimated deposits into these accounts can be helpful. Our team at Bank of England Mortgage can help you determine your income accurately and which method of self-employed income can be used for qualifying.

  1. Have a down payment - Make sure you have a solid down payment ready before you apply for your home loan. The required down payment for a self-employed mortgage will vary depending on the income documentation and type of loan you are pursuing. With Bank of England Mortgage you can put down as little as 3% as a first-time home buyer using tax returns for a conventional loan, or put down as little as 10% if getting a bank statement mortgage.
  2. Keep your debt low - Minimizing your active debt will help you qualify for a self-employment home loan. With less debt, a new mortgage loan will be more manageable, and a lender will consider the loan less risky. It is a good idea to not incur new debts prior to applying for a mortgage without first having your debt to income ratio analyzed by a self-employed mortgage lender. Also once the loan process begins, do not add new debts without consulting with your loan officer.

Mortgage Options for Self-Employed Loan Borrowers

The Bank of England Mortgage home loan options for the self-employed

Ok, so you have all of your paperwork and assets together, and you’re ready to apply for your home loan -- congratulations! The next step is to know what your loan options are so that you can choose the right option for you, your family, and your business. Wondering what kinds of mortgage you can get being self-employed? Here are some different loan programs that self-employed borrowers can use:

  • Conventional
  • FHA
  • VA
  • Jumbo
  • Bank Statement Loans (no tax returns)
  • No Doc / No Ratio Loans (no tax returns)

Self-Employment Home Loan FAQs

Common Questions About Self-Employment Mortgages

How do liquid assets play into my qualification for a self-employed mortgage loan?
If a borrower has at least 110% of the purchase price in liquid assets – meaning assets that are easily convertible into cash – Bank of England Mortgage will not require income verification to qualify for a mortgage loan. This factor can be a major benefit for a borrower whose small business is in its infancy with less than two years of history. You also get credit for all of your liquid assets, which includes retirement accounts, brokerage accounts, the cash value of life insurance policies, and more. Qualifying using liquid assets only is known as an asset depletion loan, and can be used by any borrower to qualify, regardless of whether or not you are self-employed.
What is the maximum home loan amount I can get as a self-employed person?
Bank of England Mortgage offers self-employment mortgage loans up to $6 million, with higher loan amounts considered on a case-by-case basis.
What are the benefits of a self-employed mortgage through Bank of England Mortgage?
If you are self-employed, you can obtain a home loan from Bank of England Mortgage without providing tax returns. Instead of tax returns, you can provide the most recent 12 – 24 months of personal or business bank statements to be used as qualifying income, or the most recent 1099 and year-to-date earnings statements. Also, Bank of England Mortgage will consider less than 2 years of recent self-employment history.

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