Self-Employed Loan

You can definitely get a self-employed mortgage. That goes for business owners, freelancers, independent contractors and gig workers. The type of work you do has no bearing on whether you can get a home loan. It’s your income that makes all the difference.

Self-employed folks can seem risky or complex because their income may be variable. Perhaps you’re a freelancer and your workload — and therefore your earnings — fluctuate month to month. To prove that you can afford your mortgage, your lender will need to see two years of tax returns showing that your annual income level has been consistent, with no major drops or red flags.

Here’s the thing about tax returns for the self-employed, though. They don’t always show the homebuyer’s true income. As a self-employed person, you may claim a number of business expenses that reduce the amount of tax you owe, but which also reduce your amount of documented income. Therefore, a lender may not approve you for as much as you can actually afford because they can’t verify that information.

But that doesn’t mean getting a self-employed mortgage is impossible. Quite the opposite is true. Here’s what you need to know about the process.

How to get a self-employed mortgage

The borrower criteria and mortgage application process are the same for employees and self-employed homebuyers. Your lender will review your income, credit and debt-to-income ratio† (DTI) to determine whether you qualify for a home loan. You’ll also need to show that you have enough money available to cover your down payment and closing costs.

However, self-employed borrowers may be required to provide additional documentation to prove their income. You may be asked to submit:

• Two years of personal tax returns
• Two years of business tax returns
• Bank statements
• Profit and loss statement
• Balance sheet
• List of personal assets
• List of business assets
• Additional sources of income (Social Security, alimony, dividend payments, etc.)

Your lender may also request letters or attestations from clients verifying that you have ongoing contracts. They can also ask to see your business license or a statement from your accountant regarding your finances.

While all of this might seem like a hassle, know that not all self-employed borrowers are asked to provide all of the documents listed above.

Additionally, the longer you have worked for yourself, the easier it often is to qualify for a mortgage. That’s because your business has an established track record, and you can provide ample evidence of consistent income.

If you’ve been a gig worker, contractor or self-employed for less than two years, you may have a hard time qualifying for a traditional mortgage. However, you may be eligible for a bank statement loan, so it’s still worth applying and talking to a lender about your options.

Investors sometimes ask which path fits them. Our guide to DSCR vs self-employed loans for Ohio investors walks through the difference between qualifying on your own cash flow and qualifying on a rental property’s income, and our DSCR loan guide covers the property-qualifying side in full.