Can I get a mortgage if I’m self-employed?

Being self-employed comes with several advantages that many individuals find appealing. However, for those considering homeownership, there may be some concerns regarding mortgage eligibility. Rest assured, it is indeed possible for self-employed borrowers to secure a mortgage, but it entails meeting certain guidelines.

Let’s delve into the advantages of self-employment before discussing the qualification requirements for obtaining a mortgage.

1. Flexibility: The ability to determine your own work hours and choose your workspace offers a level of flexibility that can grant you more quality time for your family and personal activities.

2. Freedom: As a self-employed individual, you have the autonomy to make decisions that are in the best interest of both yourself and your company, without having to answer to anyone in higher positions.

3. Tax benefits: By assembling a competent financial team, you can minimize your tax liability and optimize your profits, thereby taking advantage of the tax benefits associated with self-employment.

4. Higher Income Potential and Wealth Building: Depending on your business model and future plans, self-employment can provide the opportunity to earn a higher income than you would as an employee of a company. Moreover, if you establish a successful business, there is the potential for increasing your wealth through the possibility of selling it.

While all the advantages mentioned above are significant, it is worth noting that trying to minimize tax liability can sometimes impact your ability to qualify for a mortgage. Mortgage providers rely on documented income to assess eligibility, but certain programs and guidelines can assist self-employed borrowers in qualifying.

Length of Employment

The majority of programs and products require a minimum two-year history of self-employment. However, exceptions exist whereby individuals with a new business in the same or similar field, or those with comparable responsibilities in their previous occupation, may qualify with just one year of tax returns showing a full 12 months of self-employment.

Assets as Income

Utilizing assets as income is another viable option. While this approach is more commonly used as supplementary income rather than a complete income calculation, it does require an age stipulation of 62 (or 59.5 when applying retirement funds). This method benefits individuals with substantial assets but relatively low current income.

Bank Statement Loan

Bank statement loans have become popular among individuals with considerable revenue but limited net income. Instead of using tax returns for qualification, lenders review 12 or 24 months of bank statements, both personal and business, to assess eligibility.

Trust Income

For those looking to maximize asset utilization, trust income can be beneficial. Unlike the Assets as Income option, there is no age requirement, and only a continuous three-year receipt of trust income is necessary. Additionally, this option allows for the inclusion of new trusts that do not need to demonstrate a 12-month receipt history, as long as proof of current receipt aligns with the trust agreement.

Given the above-mentioned options, we recommend obtaining underwritten approval before making an offer on a new home. This straightforward and cost-free process provides you with added assurance of qualification, making your offer more attractive to sellers. Get in touch with us today to begin the process.