If you’re self-employed, you’ve probably heard that it’s harder for you to get a mortgage than most people. Which is true – to an extent. The first thing you need to know is that you aren’t the first self-employed borrower to look into mortgages. According to the most recent Department of Labor numbers, 15 million people were self-employed in 2015 or 10% of all U.S. workers.
Here at Mortgage Specialists, we help many local business owners obtain their mortgages. It’s safe to say we have the expertise to make the lending process as simple as possible for self-employed borrowers. Let’s talk about some of the common obstacles for these borrowers.
Verifying Income for Self-Employed Borrowers
The biggest reason it’s often harder for business owners to get a mortgage is because it’s harder to verify their income. With traditional buyers, lenders can see they receive a steady paycheck each month and verify how much they make with the W-2 provided by their employer. For many self-employed borrowers, their income comes from different sources and may fluctuate greatly month-to-month or year-to-year.
In addition, lenders also have to look at the stability of your business when verifying your income. According to Fannie Mae, “Lenders will consider the demand for your business, its location and financial strength, and whether it’s capable of continuing to provide you with enough income to support a mortgage.”
A less common issue that can affect self-employed borrowers is their debt-to-income ratio. While lenders look at the debt-to-income ratio for all borrowers, small business owners often fall into the higher range of this category. This is primarily due to the common and necessary practice of writing off income as a business expense. Since underwriters usually look at a borrower’s income after the expenses are taken out to determine eligibility, if a significant amount of income was written off for the business, it can limit the amount they qualify for.
Loans with Mortgage Specialists
As a small business owner, loans can be difficult. But Brent and the team made it so easy for us. We couldn’t be happier.Megan S.
The Mortgage Specialists team is committed to providing clients with outstanding customer service. We try to make the mortgage process as easy as possible which is why we don’t require our self-employed borrowers to provide tax returns for income verification. Instead, we verify your income with documentation of the deposits made into your bank account.
If you are looking to buy a home, please don’t hesitate to contact us at (402) 991-5153. We’d be more than happy to help you determine what would be in your best interest. Or click the button below to begin the process today!