Working from home, especially when you are self-employed, is quickly becoming a standard, leaving many house-hunters to seek self employed mortgage advice. It’s easy to feel like homeownership is a far-off reality for many self employed buyers – after all, self employed individuals may not always have consistent income, making it harder for lenders to evaluate their mortgage applications accurately. This can all add up to self employed individuals and gig-workers getting turned down or offered unusually higher rates.

The good news? It doesn’t have to be this way! That’s why I’m sharing key self employed mortgage advice to help you reach your dream of owning a home.

Your credit score is a major part of your application

It’s no secret that credit and mortgages go hand in hand. This fact is especially true if you’re a self employed individual. It’s important to regularly take a look at your credit report, and we recommend at least an annual review.

How do you raise your score if it’s lagging? Follow these key pieces of self employed mortgage advice to give your application an edge:

• Don’t open any new credit cards. That means car loans, department store credit cards, or even running a simple credit check.
• Don’t pay off any debts in collection.  You should always check with your Mortgage Loan Officer first.
• Leave a low balance on your cards. At 30% or less than your card limit is optimal. Equally important – don’t close any lines of credit.

Your local mortgage professional is a great resource to explain the ins and outs of why each of these tips is important.

You are more than your paperwork

Many self employed people I’ve worked with believe that they can’t get a mortgage unless they work a traditional job and are given a W-2 tax form.

This is not true!

Sure, your application will require you to submit more materials, but with the right loan officer coordinating your application, even if you don’t have a W-2, you can still apply for a mortgage.

Here’s a quick list of things you may need to get ready:

• Two years of tax returns. Include all the pages, and don’t forget your 1099s and Schedule C, if applicable.
• Two months of bank statements. Include all pages here too. It helps to have two months’ worth of mortgage payments and even money for a down payment in your accounts.
• Pay stubs or direct deposit history. This includes Venmo payments, PayPal, or any other platforms and institutions through which you receive income.
• An audited or non-audited Profit & Loss statement. A P&L can come in handy, especially in years when income is down.

Be prepared to offer up more than two years of tax returns, too. Self employed individuals often go through periods of varied income. For example, if there is a year where you made less money, submitting tax returns when you made more could signal to a lender that you have the potential to earn more and maintain your loan.

Another thing to take into consideration is that self employed borrowers often write off expenses, which lowers their “bottom line” of taxable income. Since you’re technically earning less in the eyes of your lender, this can serve as a barrier to getting preapproved. We recommend that you speak with an experienced loan officer to go over your situation.

FHA Loans can be a great option for self employed borrowers 

FHA home loans have less strict credit score requirements and manageable down payments. They are also backed by Federal Housing Administration. Since the government guarantees these loans, lenders can view a less than ‘perfect’ application as less risky.

If you’re an active military member or are exploring homes in less populated areas, you may also wish to consider a VA home loan or USDA home loan.

What’s the best self employed mortgage advice you can get? Call your local Loan Officer!

My job is to sift through complicated applications and regulatory jargon to get you a great mortgage at the lowest rates possible. When you choose to work with a local mortgage expert like myself, I know how to position your application in the best light so that you can overcome any challenges. The first step in your journey home is applying for a mortgage preapproval. However, the easiest way to start is to give me a call, and I’ll guide you through everything you need to know.