Mortgages for self-employed

Can I get a mortgage if I am self-employed is a very common question asked by borrowers. The answer to that is definitely; yes you can. Most lending institutions will require that you have proof of two years of being self-employed although there are some lenders and some programs out there that do not require this.

As a self employed borrower, you may be required to provide additional income documentation. Here are some of the additional documents that may be required:

-Business license or proof that you are self employed
-A letter from your certified public accountant stating that you have been self employed for the past two years, the nature of your business, and what portion of your business you own. They may also ask for other statements from your CPA.
-Sometimes you can use business bank statements, but you will only be allowed to use 70% of the total deposits for income. You may also use one or two years worth of personal bank statements, in which case you can use 100% of the deposits. Not all lenders have bank statement programs. If you use bank statements, you will need one or two year’s worth of bank statements, including all pages.
-You may be asked to show two years worth of business tax returns and/or profit and loss statements

Since documentation for the self-employed can be more intense than for the standard wage earner many self-employed choose to use a stated income program. This allows them to get a loan using there income with out having to provide large amounts of documentation for their income.

With self employed borrowers in mind lenders offer a No Doc loan which can help you get qualified even if you have only been in business for a short time. These loans come with a slightly higher premium, but they can help you secure the financing you need when you cannot provide the normal documentation required.

Because of the complexity of the income sources of small business owners, many self-employed homebuyers choose "Alternate Documentation" mortgages. One of the more popular "Alt Doc" loan is the "bank statement" loan, where the total deposits in the loan applicant's bank over the past 6 to 12 months are considered the applicant's income. Many lenders also allow the use of business bank statements as the self-employed borrowers' source of income.

If the self employed borrower has good credit, can provide the asset, and need to state the income on the loan application, the rate won't be much higher than regular conventional loan.

There was a time when getting a loan was all but impossible for the self employed. The lenders saw this as a market gap. So as with any gap they filled the need with several competitive programs. As the gap began to fill the competition increased. Now finding a loan as a self-employed borrower is quite simple.