GuardHill specializes in self-employed mortgage financing as many of our customers are freelancers, business owners, and high-profile entertainers. The mortgage process for self-employed borrowers is like that of a regular salaried borrower. You will complete a loan application, provide documentation, and then your loan will go into underwriting for a final approval decision. The only main difference is that self-employed borrowers may be required to provide additional documentation to showcase their income. As a result, the income may be more irregular or volatile than a traditional salaried borrower.
Self-Employed Mortgage Requirements: How to Qualify
The mortgage lender will evaluate the following items to help determine if you qualify for the mortgage.
- Income and Employment
Self-employed borrowers may qualify based on multiple types of income. For example, business owners, freelancers, contractors, and gig workers are eligible for mortgage financing. But, most importantly, the lender will require a stable income. Additionally, you must be self-employed for at least 2 years to qualify for this type of mortgage program.
The mortgage lender will require you to have a good credit score. Credit tells a story of how well you’ve handled past debt obligations and may prove how you will manage your monthly mortgage payments. A higher credit score may translate into a better interest rate and general loan terms.
Your debt-to-income ratio sheds light on how much monthly income you will have available to cover your mortgage payments after paying off other debt obligations. Self-employed borrowers may be required to have a lower debt-to-income ratio than traditional salaried borrowers.
What Documents are Needed for Self-Employed Mortgage?
The documentation required for a mortgage for a self-employed borrower may vary depending on the type of business. Most commonly, you will be required to provide:
- Two years of federal income tax returns (business and personal)
- Profit and loss statement (for small business owners)
- Copy of the business license
- Letter from your CPA stating you have been in the business for at least 2 years
Alternative Documentation Programs: Bank Statement Loans for Self-Employed Borrowers
Like freelancers or independent contractors, some borrowers may have more irregular income than others, making it difficult for them to qualify for the loan based on federal income tax returns and profit and loss statements. A bank statement loan is a non-qm loan program that may be an excellent option for self-employed borrowers with very irregular incomes.
- No tax returns required! Borrower may qualify based on personal, or business bank statements
- Borrower may qualify based on multiple streams of income in addition to bank statements
- W-2 income
- Rental income
- Retirement income
- Social Security income
- Eligible for loan amounts up to $3 Million
- Minimum down payment of 20%
- Gift funds are allowed
Tips for Submitting a Stronger Loan Application
Before gathering your documents and applying for a mortgage, follow these simple tips to help you put your best foot forward!
- Focus on lowering your debt-to-income ratio
Borrowers with a higher debt-to-income ratio are deemed riskier, making it harder to qualify for the loan. Focus on paying off high interest-bearing debt before applying for a mortgage to lower your ratio.
- Boost your credit score
Although improving your credit score is not a quick fix, it’s great to get in the habit of checking your score before applying for a new loan. If it’s not where it needs to be, focus on making timely monthly payments and avoid applying for new credit at the time of your mortgage application. Typically, higher credit scores lead to more favorable loan terms.
- Save for a larger down payment
Some self-employed mortgage programs may require a down payment of about 20%, although you can put down more. Self-employed borrowers with down payments greater than 20% typically have an easier time qualifying for the loan. Click here to learn more about tips on saving for a down payment!
Why GuardHill is one of the Best Self-Employed Mortgage Lenders
Headquartered in NYC for over 29 years, GuardHill has extensive experience helping self-employed borrowers purchase and refinance homes. We provide custom-tailored loan programs to meet each customers’ unique credit profile.
Contact us today to get started on your self-employed mortgage!