If you’re reading this article you may already know the hoops you need to jump through if you’re self-employed. Buying a home can sometimes be difficult enough with lenders asking for all types of different things, check out our Home Purchase Mortgage Checklist for a list of needed items. When you’re self-employed it just makes things a bit more difficult but not impossible. Self employed workers that have kept proper accounting shouldn’t see any real difference than getting approved for a traditional loan.
Outside of the box thinking
Sometimes it takes some creative thinking to make things work. Not everyone has perfect credit, tons of money in the bank and the best job. Sellers know that and some may be interested in some creative financing to help them move their home so they can start a new chapter in their lives. A lease to own or seller assisted financing might be just what’s need to make the deal work. If your Realtor isn’t offering to be creative then ask them about it. Sometimes sellers cannot or will not be willing to do some creative offer thinking and that’s their choice but it never hurts to ask!
Being Self Employed
It goes without saying that getting approved to buy a home when you’re self-employed is more difficult. However if you’ve been in the same line of work for the past two years then a lender should be able to make it work. Lenders will ask to see tax returns which will help them in their decision-making process and validate the information you claim on your loan application. Be prepared to have the past 3 years tax returns ready for your lender to review, it’s likely they will only need the past two years but have three years ready just in case. One item that self-employed workers will also need to provide is a profit and loss statement.
Being Self Employed doesn’t mean Not Approved
It may seem based on all the info you’re being asked to provide that the lender is trying to find reason NOT to say APPROVED but this is not the case. A good lender will ask for as much of the items up front before they submit it to the bank for approval so they can send one complete package. To some degree it’s also a game of wits with the banks, have a complete, organized file then it’s easier on the bank to approve it and increases your chances. Have a messy, incomplete file that the bank has to constantly ask for things then they might just say no to get you off their desk. Of course their will be things that the lender will ask for throughout the approval process but as previously mentioned a good lender will get most of these items up front. Don’t be discouraged by the list of items needed, remember the lender is on your team and is building your case to the bank for approval.
Obviously self-employed workers have a tougher time getting approved to buy a home than someone with a traditional job and lenders are definitely more cautious giving approvals to self-employed workers. Finding a good lender is important and although there are many lenders out there, only a few are truly good lenders. As a self-employed worker you should definitely hire a good Realtor as your very first step to help you through this process. A good Realtor that’s been in the business awhile will have a team of trusted individuals they work with on a daily basis. One of those team members will likely be a good mortgage lender, you can see why hiring a Realtor should now be your first step.