More and more people seem to be making the move toward self-employment these days, so it’s only natural that questions about self-employment and mortgages would also be on the radar. The short answer to the main question is “yes” you can still get a mortgage if you’re self-employed, but it usually isn’t quite as easy.
Types of Income
The two basic types of income that are used when determining mortgage approval are “full” income and “self-employed” or “stated” income. If you have a full time job and receive a regular pay cheques, you have full income and you can report your income in the regular way. If you are self-employed and have a really high net income, you’ll also have an easier time of it.
However, if you’re self-employed and don’t have a high net income, you are working with stated income and your options have a lot to do with the size of your down payment. The down payment categories are as follows:
- 10% to 14.99%
- 15% to 19.99%
- 20% to 34.99%
- 35% and over.
Things like your credit score, tax returns, the amount of time you’ve been self-employed, and how you receive your income will all come into play, along with the down payment amount.
It’s important to keep in mind that no one has anything against self-employed people. Lenders just want to know that the mortgage amount will be paid back and that you have the means to pay it back. When you have a regular, full-time job your income is just easier to verify than when you are going it alone.
If you can prove that your stated income will be there on a consistent basis, you’ll shouldn’t have too much trouble. Not too long ago, self-employed people were able to declare an income and they were off and running. But when people started taking advantage of that system and wouldn’t be able to make their payments, the rules had to be tightened.
Qualified, Expert Help
Now, you need to back up your statement of income with proof. A lender may want to see bank statements, contracts, tax returns, or anything else that might shed light on your income. If you need some guidance or a push in the right direction, get in touch with a mortgage expert who deals with this sort of thing on a daily basis. You’ll be glad you did!