Mortgage Basics: Self-Employed Mortgage Loans

Are you a business owner or self-employed individual looking to buy a home in 2022? There are some key differences in the mortgage process if either of these descriptions applies to you. Keep reading to make sure you satisfy all of the requirements to qualify for self-employed mortgage loans!

The Basics

The main difference in the mortgage process between self-employed individuals and others is verifying income. Lenders need to know exactly how much you are bringing in each year so they can do the math and figure out if you will be able to pay back the loan to which you are applying. For employees, your company’s HR or accounting department will send your income statements to the bank for you. For those who are self-employed, you will have to do this on your own.

Another key step is your debt-to-income ratio. Lenders care more about DTI when evaluating someone who is self-employed, and you should aim to keep this ratio below 45%. In other words, the amount of debt you have should not exceed 45% of your income each year.

Finally, your credit score will be factored more heavily into the lender’s decision. Find out what the minimum credit score needed for approval is, and take the steps to reach that number before applying for a mortgage loan. 

What Lenders are Looking For

When someone who is self-employed applies for a loan, the lender will need concrete evidence of the person’s income, the status of their business finances, any outstanding debts, and the future projections of how much your company will turn over in the next few years when the loan will be paid off. Take the time to put all of these items together before applying for the loan, this will speed the loan process up. The location and status of your self-employment are of utmost importance, don’t leave anything to chance.

Income Documents

As stated previously, a mortgage lender needs to see every piece of your income stream. There are many methods for proving to the lender how much you make. Each of these methods involves some sort of documentation. This documentation can be 2 years of personal tax returns, 2 years of business tax returns, current income statements from the start of the current year to the current day, a professional license issued to your business, or your CPA’s contact information so they can facilitate income statements. 

Contact Us

Equity Mortgage was founded in 1986 as a lender to serve all mortgage needs. Our philosophy is to offer a full range of mortgage programs and home improvement loans to meet the diversified lending needs of individuals, commercial concerns, groups, and organizations.

At Equity Mortgage, we work with a variety of clients with varying degrees of mortgage needs. We offer our clients alternative options to their current loan programs with our wide range of mortgage products and flexible lending practices. 

Experience fast, professional service for coronavirus mortgaging today and into the future. Contact us for more info or give us a call at 1-800-332-9221.

* Specific loan program availability and requirements may vary. Please get in touch with the mortgage advisor for more information.