Being your own boss does not automatically prevent you from qualifying for a mortgage. Business owners, freelancers, independent contractors, and other self-employed borrowers can become homeowners. The process often requires additional documentation to show stable, ongoing income.
If you’re thinking about buying a home or purchasing an investment property, understanding the paperwork and approval process can help you prepare.
What do lenders look for?
Lenders evaluate your ability to repay the loan by reviewing your income history, business stability, debts, credit, and available funds. For many conventional home mortgages, lenders generally review a two-year earnings history. Shorter self-employment histories or fewer tax returns may be acceptable when specific requirements are met.
Business income reported on your personal tax return isn’t always money you’ve received or have available to spend. When you use self-employment income to qualify, lenders evaluate how much reliable income is available to support your loan payments without weakening your business financially.
Commercial investment financing follows different requirements. In addition to reviewing the borrower’s finances, lenders typically evaluate the property’s income, operating expenses, and ability to cover loan payments. Requirements vary by lender, loan program, and property type.
What paperwork should you gather?
Your checklist will depend on your business structure, loan program, and the property you’re purchasing. Common requests include:
- Personal federal tax returns, including all schedules.
- Business tax returns, when applicable.
- Recent personal and business bank statements.
- A year-to-date profit-and-loss statement and, if requested, a balance sheet.
- Proof of business ownership or operation.
- Statements showing savings and other assets available for the purchase.
- Details about outstanding personal and business debts.
For investment or commercial properties, lenders may also request leases, rental payment information, and property income and expense statements. Your lender may request authorization to obtain IRS tax transcripts or ask you to explain large deposits and changes in income. Speak with your mortgage professional and tax preparer early to understand what you’ll need. Keeping your records organized and current can help avoid delays.
Start preparing before you start shopping
You don’t need a traditional paycheck to begin exploring property ownership. You do need a clear picture of your finances and documentation that supports it. Keeping business and personal finances organized, maintaining current financial statements, and responding promptly to document requests can make the process easier.
Self-employed and ready to explore your next move? Contact EB Mortgage to discuss your goals, understand the paperwork, and learn which financing options may fit your situation.
*Loan availability and documentation requirements vary by lender, program, property type, and borrower qualifications. All loans are subject to underwriting and approval.
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EB Mortgage is a locally owned mortgage company specializing in home purchases, refinancing, and commercial loans. Our competitive wholesale rates are hard to beat. We offer more products, more options, and more solutions to help you find the financing that’s right for you. Our 3C Process makes getting started easy: Complete your pre-approval request, Consider loan options that fit your needs, and Choose the financing solution that’s right for you. Call or e-mail us today!
Written by the Digital Marketing Team at Creative Programs & Systems: https://www.cpsmi.com/.