Can I Get a Mortgage If I’m Self-Employed?

There are numerous benefits to being self-employed, but being your own boss can sometimes make it more difficult for you to secure a mortgage. Lenders tend to see the self-employed as a larger risk because their income levels can be highly variable from year to year. Here are several important variables to consider for those who are self-employed and looking for a mortgage:

Income Taxes

The self-employed enjoy certain benefits when it comes to reporting income taxes and are able to use many different types of options for deductions. While reporting a low income has many obvious tax benefits, the opposite is true when getting a mortgage. It is better to show a high income when applying for a mortgage. This can put you in an awkward position because your mortgage loan officer will typically need tax returns from the two previous years before getting you a loan. It may sometimes be better to take a hit on your tax returns and report as much income as possible in order to secure a higher mortgage.

Liquidity

Having money in your bank account can go a long way. Because you are viewed as a riskier borrower if you are self-employed, proof of significant cash reserves can go a long way in easing lenders’ minds. You should expect to pay a larger-than-normal down payment. It is also wise to keep enough in reserve to pay for the first several months of the mortgage.

Track Record

You will need to be able to prove that your business has been around for at least two years.  Lenders want to see a successful track record before considering you for a mortgage. It is very important if you are self-employed to have an excellent credit score. A credit score that is very high can go a long way in securing a loan. Additionally, you will need to keep excellent records and be able to verify where your income is coming from.

While it may be a little more difficult to get a mortgage if you are self-employed, it is by no means impossible. You will want to talk to a loan officer early in the process to make sure that everything you are doing is on the right track.

Are you self-employed and looking for a mortgage? Keystone Mortgage provides Tennesseans with the best mortgage experience, period. So what are you waiting for? Apply here now. Call us today at 865-909-0211.