If you are self-employed and in search of a mortgage, you may believe that your options are restricted because of your self-employment status.
You may have heard that you cannot qualify for FHA loans or other government-insured mortgages such as VA or USDA.
You might even have heard that you cannot get a conventional or jumbo loan if you are self-employed.
But there is nothing about being self-employed which prevents you from qualifying for any of these types of loans.
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It can be more difficult to qualify for a government-insured loan (or any type of loan) if you are self-employed for the simple reasons that:
1-Lenders tend to perceive self-employed borrowers as presenting a riskier prospect by default.
2-Not all lenders have self-employed application processes streamlined to make income verification easy.
So, the first step to qualifying for a government-insured loan such as an FHA mortgage as a self-employed person is to choose a mortgage company that will consider your application with an open mind, and which already has a streamlined process in place for situations such as yours.
Next, you will need to get your documentation ready. You will need to be able to demonstrate the following:
- Two years of self-employment. Note that you can substitute a year of education. What is most important is that both years be within the same industry or type of work. The reason is that you are not only demonstrating the stability of your work, but also that you are on a focused career path moving into the future.
- You will have the best chance of qualifying if you do not have any gaps in your income during whatever length of time you have been self-employed. If you do have such gaps, you will need to be able to explain them in a way that will reassure lenders that they do not indicate overall instability.
- Since you cannot provide a W-2 or pay stubs, you usually have to furnish bank statements instead to document your income.
- The way that you calculate your income for tax purposes is also relevant to your application. If you take a lot of business deductions, your net income could appear unusually low. To deal with this, you may need to change the way you handle deductions, or you will need to choose a mortgage company that can work around this issue with you (bank statements can help with this).
We recommend that you read through the actual guidelines for the type of loan you are applying for to understand how being self-employed could impact your application process.
Bridgepoint Funding Makes It Easy to Qualify for a Self-Employed Mortgage
At Bridgepoint Funding, we process FHA and VA loan applications routinely, including from self-employed borrowers. In fact, we have a stated income loan program to help borrowers with non-traditional income situations to quickly and easily apply for financing.
If you are ready to apply for any type of mortgage as a self-employed borrower in California, government-insured or otherwise, please give us a call now at (925) 478-8630. During your consultation, we will go over the loan process with you in-depth and let you know exactly what you need to do to qualify for an FHA, VA, conventional, or jumbo mortgage.