There are no additional requirements for home loans for the self-employed. You are subject to the same credit, debt, down payment and income standards as other applicants. 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.
For most mortgage applicants who receive W-2 forms, it's easy to document their income. They submit copies of their two most recent pay stubs and W-2 forms that cover the past two years. Unless they have a lot of investment income, tax-deductible employee expenses, or earn commissions, tax returns are not required. These mortgage applicants also provide copies of their bank, investment and retirement statements, and the insurer will extract your credit report, verify your FICO scores, and analyze your expenses.
If the credit is satisfactory and the income is sufficient, the applicant is likely to be approved. Self-employed mortgage borrowers can apply for the same loans “traditionally employed borrowers can do it.” A broker who has a history of working with freelancers can more easily guide you through the process and save you the legwork. Some lenders may worry that they won't earn a stable enough income to make their monthly mortgage payments, and others may simply not want to deal with the additional documentation that may involve granting a mortgage to a self-employed person. Because of this, self-employed mortgage applicants generally have to meet a higher threshold of lender requirements to obtain a home loan.
The fewer monthly debt payments you have when you start the mortgage process for the self-employed, the easier it will be for you to make your mortgage payments. 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. Mortgage requirements for self-employed workers often involve greater verification of documents and, sometimes, a more extensive analysis of their employment history. For most mortgage programs, there is no absolute minimum employment requirement; you don't have to be at your current job or with your current employer for a specific period of time to qualify.
Keep in mind that FHA loans come with other significant costs, including a large initial mortgage insurance premium, so keep it as an alternative option if you can't get approval for a conventional self-employed mortgage. 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. 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. Obtaining a joint mortgage with a co-borrower who is employed with Form W-2, such as a partner, spouse, or trusted friend who will share ownership of your home, is another way to improve your prospects of getting approved for a mortgage if you are self-employed.
