When qualifying for a home loan, if you are a salaried or hourly employee, who receives pay stubs and W-2’s, the process is quite simple.
You provide your pay stubs to a lender, they quickly compute your monthly earnings, look at your monthly debts and tell you how much you can qualify for.
However, if you are 1099’d or self-employed, the process is a little different, but still not difficult, if you know what is required. In this article, we will discuss how to obtain a home loan if you are self-employed and two key items to have in place.
Self Employed - Tax Returns:
Federal Tax Returns are analyzed, if you are self-employed and lenders will compute your income based on a number that is very similar to your adjusted gross income (plus potential add backs for certain items).
That means that gross revenue doesn’t matter, it’s the bottom line of what you claim on your taxes, after expenses that does matter for qualification.
Now, while you do have to prove your business has existed for at least two years, on conventional home loans, you may often time be able to qualify off of your most recent years’ tax returns.
This is beneficial if your business income is trending upward, as it will allow you to potentially qualify for a larger loans size.
Self Employed - Work History:
As mentioned above, even though your income qualification could potentially only go off of your most recent tax returns, it is still necessary to prove a two year work history of self-employment.
This can be proven through business licenses or even a CPA letter, that will provide third party verification of your business. If you are 1099’d a verification of employment from your employer will suffice for this as well.
If you have these above things in place, then you can potentially begin to look for a self-employed home loan. Now of course, credit, down payment and other factors weight into the equation as well, but they would be the same standards as anyone else who is applying for a home loan.
As always, it is best to speak with a trust lender, such as Strategic Mortgage and have your documentation reviewed properly. This will allow you to properly pre-qualify for a new home loan and see all available options for your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 703-5844 or by emailing: firstname.lastname@example.org or online at www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440