Mortgages for the Self-Employed

Many entrepreneurs, contractors, and other self-employed households have enormous potential to buy a home. The problem is, some of their income may be more difficult to show in the mortgage underwriting process. Some lenders offer non-traditional underwriting using less common financial documentation. It is important to gather and review your financial documents for any business or other assets to prove you are loan worthy. Talk to a real estate professional to go over examples and review the best, most hassle-free way to get your mortgage approved. In this week’s blog post, Preferred Capital Funding in Conyers, GA is here to help you learn about getting a mortgage if you are self-employed.

Bank Statement Lending

If you are not armed with W-2s or paychecks, a bank statement loan may be a wonderful way to find a mortgage. When approving a bank statement loan, lenders will review all your bank deposits and records to determine how much you can afford to borrow. Underwriters calculate for business, contract, or investment income. It is best to speak to your accountant on how to document your income in your accounts. Mortgage lenders usually ask for about 12 months of personal bank statements and 24 months of business statements. Formulas are then used to determine an average monthly income and any other liabilities you may have. If you have a business, you should ask your accountant to provide a profit and loss statement, particularly if you use one account for both personal and business finances. To get approved for a bank statement loan, you will also need good credit (usually a score of at least 680 is required).

The Benefits of Using Loans for the Self-Employed

There are several benefits to using a self-employed loan. For instance, some banks permit the self-employed to account for “asset depletion” in their approval process. They may apply a formula to review a borrower’s liquid assets and count them towards your average income. In this sense, you may be able to leverage great income off your stocks, bank, and retirement accounts to fund your mortgage payments. This means you can skip the paperwork for employment or other income. If you decide to go this route, then you need to demonstrate strong cash flow with your investments.

Getting Ready to Use a Self-Employed Loan

There are countless ways you can use self-employed loans to buy your dream home. Just reach out to a member of our experienced team for help. We help find solutions for borrowers who do not have a lot of standard loan review documentation. Don’t let having non-traditional income stop you from getting approved for a mortgage. Contact Preferred Capital Funding for more tips on how to use bank statement loans at our Conyers, CA office.