Trying to Get a Mortgage When You’re Self-Employed?

Self-Employed and Struggling to Get a Mortgage? Bank Statement Loans Could Be the Answer.

Being self-employed or freelance offers amazing freedoms, but securing a traditional mortgage can sometimes feel like an uphill battle. Why? Lenders often rely heavily on tax returns, which might not accurately reflect your true earning power after deductions.

Traditionally, a lender looks for a self-employed borrower who has worked in the same manner for a minimum of two years, but there are a few loans available for those who have been self-employed for just one year.

You don’t have to have a separate business entity such as a corporation or an LLC. Depending on your profession, you may report your earnings on your personal tax return. You don’t even need a business bank account, although it’s usually a good idea to keep business and personal separate.

There are specialized loan options designed specifically for self-employed individuals like you! One popular solution is a bank statement loan.

Here’s how it works:

• Gather Your Bank Statements: Collect at least 12 months of your most recent bank statements. Two years’ worth will get you an even lower rate.
• Highlight Qualifying Deposits: Identify and mark deposits directly related to your business income. Be prepared to provide supporting documentation if needed.
• Factor in Expenses: A lender will apply an “expense factor” to your total deposits, which varies based on your industry and business structure. This helps estimate your actual income.
• Calculate Your Income: After deducting the expense factor, your qualifying income is determined.

Benefits of Bank Statement Loans:

• Focus on Real Earnings: Qualify based on your actual bank deposits, not just your taxed income.
• Flexible Down Payment Options: Depending on your credit score and loan amount, you might qualify for a down payment as low as 10%.
• Accessible for Various Self-Employed Professionals: Whether you’re a freelancer, consultant, or small business owner, this loan can be a viable path to homeownership.

Other types of loans for self-employed and freelancers

Bank statement loans are not the only type of mortgage for those without a paycheck, but it’s one of the most popular. Don’t despair if this doesn’t work for you, though. There are many others of mortgages designed specifically for those who don’t fit into the “conventional” box.