Self-Employed Mortgage: How to Make It Possible?

Self-Employed Mortgage: How to Make It Possible?

Atlantic Home Mortgage
Atlantic Home Mortgage
Published on September 3, 2021

Self-Employed Mortgage: How to Make It Possible?

You might be worried that you won’t be able to get a self-employed mortgage. Being your own boss is great, trying to get a loan with income that is often irregular and without a W-4 to show is less so.

Fortunately, it is entirely possible to get a self-employed mortgage. You just have to do it right. Here are some things you need to know.

Build a History

Generally, you don’t want to try and apply for a loan unless you have been in business for at least a couple of years and know your business is stable. Not only will you be more likely to get approved, but you will also be less likely to end up underwater if things go bad for a few months.

You need to keep all of your tax and banking documents ready to show a lender. Lenders are looking for a strong business with a stable income. They will consider the ability of your business to keep generating income.

Get the Right Documentation

As you don’t have a W-4 to prove your employment status, you will need documents to prove you are, in fact, self-employed and have a stable income. Here are some things you should bring:

  • The name of your accountant. If you don’t have an accountant, get one.
  • Your state or business license, if any.
  • Your business’ insurance certificate.
  • A DBA, if you have one.
  • The name of any professional organization you can demonstrate you are a member of.
  • Letters or emails from current clients.
  • Personal tax returns or W-2s (if paid through a corporation).
  • Profit and loss forms.
  • Debt and monthly payments.
  • Assets, such as savings and stock, are clearly listed.

If you are co-signing with a spouse or partner, then obviously you will need their documentation too. It can sometimes be easier to get a loan if your spouse is employed in a W-4 job, but it is still more than possible even if you are both self-employed.

Pay Down Your Debt

You want to get your debt-to-income ratio as low as possible and also to raise your credit score. Make sure to pay off your credit cards and any personal loans. If you took out a loan to start your business, pay it off. Lenders pay a lot of attention to your DTI, and you need it to be below about 43% to get approved. Ideally, though, you want it to be much lower.

Particularly, if you haven’t paid off a loan you took to start the business, it will look to a lender as if you aren’t quite solvent yet, so worry about that first.

Build a Down Payment

Ideally, you want enough money upfront for a 20% down payment, as this will help you avoid having to pay for mortgage insurance. Practically, you want to set aside as much money as you can. Put it in a separate account so you won’t be tempted to spend it on personal expenses…or, for that matter, business expenses. Keep it separate from any emergency fund.

In the long run, this will save you money and it makes you a lot more attractive to lenders. They will likely take you more seriously and are more likely to give you a good interest rate.

Build a Relationship With Your Lender

Even if you don’t have the savings and the business stability quite yet to actually apply for a loan, you can always start building a relationship with a lender.

Talking to a lender about your specific situation will help you understand what documentation you need to successfully apply for a loan and what kind of income and down payment they are looking for.

Atlantic Home Mortgage can help! We can talk to you about your situation and help you get into a position to get a self-employed mortgage and buy a home. Contact us today to start the process!

Atlantic Home Mortgage
Atlantic Home Mortgage Alpharetta
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(888) 309-4643

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