Yes, you can get a mortgage if you are self-employed. In general, you'll need to prove two years of income history from your self-employment with tax returns. Self-employed mortgage borrowers may qualify for conventional and backed loans. You're more likely to get approved and have favorable loan terms if you have a good credit score, have been in business for two years or more, and can demonstrate reliable income.
You may also qualify with a co-signer who has a high credit score. Most mortgage lenders require at least two years of stable self-employment before they can qualify for a home loan. Lenders define a “self-employed person” as a borrower who has an ownership interest of 25% or more in a company, or someone who is not a W-2 employee. Many people are apprehensive when applying for a home loan, but self-employed borrowers have to provide a lot of documentation, even more so than employed borrowers, who often only need to file a couple of years of W2, personal tax returns and recent pay stubs.
As long as you're prepared for it, and your financial situation is in order, you can become a self-employed mortgage borrower. You can also consider working with a mortgage broker, whose job is to learn the ins and outs of each lender's policies regarding loans to self-employed workers and whose relationships should help you move forward with your mortgage application. Whether you're self-employed or an employed borrower, having the time and space you need to prepare to apply for a mortgage will make the process faster, easier and much less stressful. You'll need to provide certain documentation to verify your work income and show the lender that you're eligible for a mortgage.
Self-employed mortgage borrowers can apply for the same loans “traditionally employed borrowers can do it.” Because of this, self-employed mortgage applicants generally have to meet a higher threshold of lender requirements to obtain a home loan. However, in the case of the employed person, the tax return is used to verify that they have maintained stable employment without significant changes. While Rocket Mortgage's down payment requirements don't change as a result of self-employment, some mortgage lenders may try to mitigate your risks by having you make a higher down payment, resulting in a lower loan-to-value (LTV) ratio. A broker who has a history of working with freelancers can more easily guide you through the process and save you the legwork.
