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I’m self-employed. Could I still qualify for a mortgage?

Of course you can. First off, kudos to you for being your own boss, taking charge of your own trajectory in life. The perks of self-employment measure right up there with Mom’s homemade chili. But, being self-employed means you need to understand a little bit more about the mortgage industry than your corporate counterparts.

There are over 14 million self-employed borrowers nationwide. Let’s add you to that statistic, shall we?

When you begin the loan process, you’ll be asked to provide verified forms of income documentation, such as W-2s and paystubs. As a self-employed individual, you likely don’t have paystubs and your income possibly varies a great deal from month to month and year to year. But no fear – we can help.

  1. Provide your last two tax returns. With these documents we will be able to determine your average monthly income over the last two years.
  2. Fill out the IRS Form 4506-T. This gives us the permission to request your tax records from the IRS, providing insight into your business’s cash flow.
  3. Determine your debt-to-income ratio. Often times, you can borrow a percentage of your income, aka your DTI. In order to receive approval on the largest mortgage possible, you should eliminate as much debt as possible, including auto loans, student loans and high-interest credit card debt.
  4. Monitor your credit score. The higher the score, the easier the qualification process will be and the better chances you are of receiving a competitive interest rate. Check out annualcreditreport.com to receive your report free once per year.
  5. Reduce your deductions. It’s a tongue twister but one that will pay off in the end. The less deductions you take, the easier time you will have qualifying for a mortgage. Business expenses add up quickly and appear in the form of a lower taxable income.

As a self-employed individual, you CAN qualify for a mortgage. Make sure you work with a realtor and lender who understand your situation from the get-go and have only your best interests in mind.