Financing for Self-Employed Mortgages

If you have been self-employed for any length of time, you know how difficult it is for self-employed individuals to get loans. This is especially true for larger purchases, such as homes and commercial properties, because, unless you have the money in a bank somewhere, you can’t prove that you will be able to repay the loan. However, you may have several options to finance a home that you may not have considered.

Stated Income Loans

These loans are based solely on your income. In the past, you didn’t have to produce any documentation that proves your income. If your credit was good enough and the property value was high enough, you were approved based on what you said you made. Unfortunately, many people defaulted on their stated income loans during the 2008 housing crisis, so this type of loan has been reformed somewhat.

Today, you do have to prove your ability to repay most mortgage loans. Although state income loans still require no tax returns or proof of income, they are not available for properties you will live in or work out of. In addition, you will need a high down payment, significant cash reserves in the bank, and an excellent credit score. You will have to provide bank statements to prove your reserves. In addition, you need to have a high income.

Bank Statement Loans

As a self-employed business person, you have other options as well. First, you may pursue a bank statement loan, which does not require tax returns or a hefty amount of documentation. Because you will provide some proof of income, these loans have a higher qualification rate. For example, you will need to present copies of your business license. You also need to submit your personal and business bank statements and a letter signed by your CPA concerning your current business status. In addition, you can occupy the property you hope to finance. Your business must be somewhat established with 2 or more years of service. Your credit score should be above 600 as well.

Bank statement loans will finance up to 90% of the property value if you have excellent credit and enough money in the bank. You also don’t have to pay for private mortgage insurance. If you seek this type of loan, your minimum loan amount has to be $150,000, and you will experience higher closing costs than those from a traditional mortgage.

Whether you are a freelancer or business owner, you have a few flexible loan options. If you need a loan and are having difficulty getting approval for a traditional mortgage, look into stated income and bank statement loan options.


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