Self-employment is both challenging and rewarding as you have a higher ceiling to boost your earnings. You are more in control of your success. Instead of growing somebody else’s company, you get to enjoy the growing phase of your own business. However, even when you boost your income as a self-employed owner, sometimes the hurdle of getting approved for a mortgage is still very challenging.
The reason for that is the tax returns of many self-employed borrowers will show numerous tax write-offs thereby lowering your qualifying income. Moreover, you’ll need to give the lender a profit and loss statement, additional IRS forms Schedule C, and if applicable Form 1120S or K-1.
On the other hand, if you are a W-2 salaried borrower, the requirement to give tax returns to your lender is less than for someone who is their own boss or receives a 1099. By using the automated underwriting results for a salaried person, the requirement to provide tax returns is not always necessary to qualify for a loan. However, if you receive retirement, SSI, other business income or rental property income, this may likely cause the need to still review your tax returns by the underwriter.
In contrast to borrowers who can provide their paycheck stubs, people who are self-employed may have a more challenging time proving a consistent monthly income and often use specific tax write-offs for business expenses. For this reason, their adjusted gross income is less on their tax returns and may make it difficult to qualify for a mortgage.
If you recently made a change from being a salaried employee to being a full-time self-employed earner can be extremely satisfying in many facets of your life. However, with that switch, new business owners face a new challenge when looking for a mortgage. By having less than two years of tax returns as an autonomous earner to give to your loan officer and the underwriter, financing a home can be difficult.
The good news is, there are some financial solutions that do not require two years of tax returns below.
1.) 1 year tax return program, available if approved by an automatic underwriter system using a conforming loan.
2.) Bank statement mortgage – more information .
3.) Use Liquid assets of $250,000 or more; known as Asset Amortization .
4.) No income, no job, no tax returns for a rental property loan – rents need to cover the mortgage payment.
5.) Be sure we review your tax returns before using these routes above so we can offer you the best rate as some deductions may be added back in as income.
Call us or apply online to see which program works best for you.