Looking for mortgages as a self-employed worker is now many times easier.
If you’ve tried to do so before, you’ll understand that it’s traditionally a long process with much more paperwork than if you were employed by someone else. Since while self-employed, all expenses will be subtracted from gross income, you will find many more hoops to jump through to get a loan.
First on the list, you’re required to provide more than W-2 forms, pay stubs (if you pay yourself with paystubs) and Federal Tax returns to prove your financial stability. If your company files company tax returns, they will be required. Secondly, it is common to have to send the most recent 3 years of these tax returns filed, in addition to an electronic transcript from the IRS. Finally, lenders usually will have more questions, and loans take longer to process, making it a general pain to get your mortgage application approved. The reason why this occurs is fairly straightforward, as the lenders want to have solid evidence of financial stability for your business.
Great news is there are many programs available now for self-employed borrowers!
Freddie Mac and Fannie Mae have released updated guidelines with fewer documents required if self-employed borrowers have been in the business for more than 5 years. This will help lenders streamline underwriting of applications. Also now if there are a lot of expenses showing on the tax returns, there are new programs using alternative income calculations to improve debt ratio, which in turn helps you in qualifying for a mortgage.
If you’re self-employed and wondering how much you can qualify for, give me a call (925) 216-3618 and we can discuss how the new guidelines can help you. It will be much easier today!