Yes, it may be more difficult to obtain a mortgage if you are self-employed. You'll need to provide more documentation than someone who has had the same W-2 job for several years. Some lenders don't work with self-employed people because of increased subscription requirements. Self-employed people often have multiple sources of income.
This can make it a little more complicated to document income. In addition, these revenues often fluctuate depending on the company's performance, so their income may appear less stable to lenders compared to applicants who have traditional employment. While a traditional employee receives a W-2 tax form that shows their exact salary, self-employed people usually have several documents showing their income and related cancellations or business expenses. This can make it difficult for lenders to determine how much a self-employed person actually earns in a year.
Buying a home for the first time is a new experience. Read our top 10 tips for first-time homebuyers to guide you through the process. 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. A broker who has a history of working with freelancers can more easily guide you through the process and save you the legwork.
Because of this, self-employed mortgage applicants generally have to meet a higher threshold of lender requirements to obtain a home loan. 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. 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.