Are you a self-employed individual dreaming of buying a home? Congratulations on taking this exciting step! As a self-employed homebuyer, you may have unique considerations and questions regarding the process. In this friendly and informative blog post, we will guide you through the ins and outs of buying a house while self-employed. From understanding mortgages for self-employed homebuyers to qualifying for a self-employed mortgage, we have you covered. Let’s embark on this homeownership journey together!

Why Buying a House as a Self-Employed Individual Is Different

Being self-employed offers many advantages, but it also presents unique challenges when it comes to securing a mortgage. Traditional lenders often rely on stable employment history and consistent income streams. As a self-employed individual, your income may fluctuate, and you might face additional scrutiny during the qualification process. However, understanding these differences and taking proactive steps can help you navigate the path to homeownership successfully.

Mortgages for Self-Employed Homebuyers

Self-employed homebuyers have access to various mortgage options tailored to their needs. Here are a few popular choices:

  • Conventional Loans: These loans are not backed by the government and typically require a higher credit score and a larger down payment. However, they offer flexible terms and competitive interest rates.
  • FHA Loans: Insured by the Federal Housing Administration, these home loans are suitable for those with lower credit scores or smaller down payments. FHA loans may require additional documentation to verify income for self-employed borrowers.
  • Bank Statement Loans: Designed specifically for self-employed individuals, bank statement loans rely on bank statements rather than traditional income documentation to assess eligibility. These loans provide more flexibility for those with irregular income.

Qualifying for a Self-Employed Mortgage

Qualifying for a mortgage as a self-employed homebuyer requires diligent preparation. Here are key factors that lenders typically consider:

  1. Income Documentation: Expect to provide tax returns for the previous two years, including all schedules and business tax filings. Lenders assess your income stability based on these documents.
  2. Debt-to-Income Ratio: Lenders evaluate your debt-to-income ratio, which compares your monthly debts to your income. Minimizing debts and maintaining a healthy ratio will increase your chances of mortgage approval.
  3. Credit Score: A strong credit score is important for any borrower, including self-employed individuals. Maintain good credit habits, such as making timely payments and keeping credit utilization low.

Can You Get A Mortgage If You Have Less Than Two Years Of Self-Employment Income?

While two years of income history is a common requirement, some lenders offer options for self-employed homebuyers with one year or less of income. Working with a mortgage professional who specializes in self-employed borrowers can provide valuable insights and alternative mortgage programs.

Proving Income As A Self-Employed Individual

Mortgage lenders typically require annual tax returns, bank statements, profit and loss statements, and other financial documents like the 1099 form to verify additional sources of income outside of your primary business. Organizing these records and maintaining detailed financial records will strengthen your application.

Fannie Mae and Freddie Mac have stringent guidelines for self-employed buyers that often require multiple documents to prove their income. Lenders now want to make sure that self-employed borrowers continue to operate both viable and profitable businesses.

In some cases, Fannie Mae and Freddie Mac can even approve income calculations off of only one year of tax returns. This can be very helpful if net income has significantly increased year over year.

Most self-employed borrowers now need:

  1. Unaudited Profit and Loss statements for all periods not covered by tax returns;
  2. TWO MONTHS of Bank Statements with deposits that corroborate the P&L Figures; or
  3. Audited Profit and Loss Statements in lieu of items #1 and #2.

Will Your Business Expenses Affect Your Mortgage Application?

Lenders consider your net income after deducting business expenses. It’s important to note that while business expenses can reduce your taxable income, they may also impact your mortgage application. Lenders typically evaluate the stability and consistency of your income, so it’s crucial to showcase a clear and accurate picture of your financial standing. Minimizing both personal and business debts can help improve your debt-to-income ratio and positively impact your mortgage application. Working closely with a mortgage professional who understands the intricacies of self-employment can provide valuable guidance on how to present your business expenses in the most favorable light and maximize your chances of mortgage approval

Can You qualify for a mortgage if I have a low credit score?

While a good credit score is beneficial, it’s important to note that there are mortgage options available for borrowers with lower credit scores. For example, FHA loans often have more flexible credit score requirements compared to conventional loans. These loans are insured by the Federal Housing Administration and offer opportunities for individuals with lower credit scores or limited credit history. FHA loans may be a viable option for self-employed homebuyers looking to qualify for a mortgage with a lower credit score. However, it’s essential to consult with a mortgage professional who specializes in working with self-employed individuals to explore the best mortgage options suited to your specific circumstances. They can guide you through the process and help you identify the most suitable loan programs available. Remember, even if your credit score is lower, proactive steps to improve your credit health can still positively impact your mortgage application.

JVM Lending: Self-Employed Buyers Experts

As a self-employed individual planning to buy a house, it’s crucial to partner with a lender who understands the unique needs and challenges you face. JVM Lending specializes in working with self-employed borrowers and offers unparalleled expertise in navigating the mortgage process for individuals like you. Our knowledgeable team can provide personalized guidance, explore tailored mortgage options, and ensure a smooth and successful homebuying experience.

Don’t leave your homeownership dreams to chance. Trust the experts at JVM Lending to be your trusted partner throughout the mortgage journey. Contact us today at 855-855-4491 or visit our website at to learn more about how we can help you secure the mortgage that aligns with your self-employed status and sets you on the path to homeownership. Let us guide you with our experience and dedication, making your dreams of owning a home a reality.

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167

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