Tag Archives: self-employed

Mortgage loan agreement with house keychain

Can You Obtain a Mortgage Home If Self-Employed?

Mortgage loan agreement with house keychainThe simple answer to this is yes, but the process is a little intricate. While many self-employed people earn a good living, it’s always harder for them to prove their income as compared to those who receive their W-2. This is what complicates obtaining a mortgage for the self-employed.

However, even if you’re self-employed doesn’t mean getting a mortgage is out of your reach. It only means that you need to be aware of what lenders look for when assessing your credibility. This article will shed light on what matters in your mortgage journey.

Proof of consistent income

Lenders need to be sure you can afford a mortgage. For self-employed people, what you take home is likely to be inconsistent. To determine if your average monthly income will be sufficient to service a mortgage, the lender will want to see copies of your tax returns. Most lenders will review tax returns of at least two years.

An easy way to determine how much mortgage you can afford is to add your gross income for the last two years and divide it by 24. Lenders will also consider your deductions since this impacts your net income. Every lender has a desired income range applicant should have so you might want to consult a mortgage broker in Tempe on the exact numbers.

Credit score

You might be a strikingly successful business person. However, having a lousy credit score may hinder you from getting a mortgage. And if you do succeed to convince a lender, your rates won’t be favorable. To calculate mortgage rates, lenders consider your credit score, debt-to-income ratio and your down payment.

Your assets play a role, too

It’s a plus for you if you have a sizable emergency fund or some serious cash in SEP IRA. When you have either of these, the bank feels assured that you can still service the mortgage in case your income dried up temporarily. You should also document your business assets carefully.

Ultimately, mortgage lenders just want to know that what you’re making is enough to service the home loan. If you’re self-employed, you just need to prove that your income is consistent and sustainable enough to service the mortgage.