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How To Get A Mortgage When Self-Employed

Self-employed and looking for a mortgage? Here’s what you need to know:

You’re considered self-employed if you are a business owner that owns more than 25% of a company, a freelancer or a contract worker. Essentially, if you do not receive a W-2 form and receive a 1099 instead that puts you under the self-employed category. Let’s dive into it 👇

When it comes to mortgages and self-employed individuals there’s a bit more paperwork involved. You’re probably wondering ‘how much more paperwork compared to a W-2 Employee?’ 

The types of documents📝 all depend on your situation. If it is a sole proprietorship then lenders generally will only review your personal tax returns, as these show the schedule C income- which is the business income. This is also typically for people who own an LLC and do not file separate business tax returns. If you are a partner to a business make sure that you not only have our personal returns but also your business returns. Income from your business returns are considered schedule E on your tax returns. Listed down below are some other types of documents that you may be asked to submit. 

Whether you’re ready or just thinking about the idea of owning a home the best choice is to start early. Some documents you may be asked to submit are:

  • Bank statements- business & personal

  • Personal tax returns- 1040’s 

  • Business tax returns- 1120’s or partnership returns- 1065’s 

  • Work history, length of time the business has been open- 2 year is the requirement  

  • DTI (Debt to income ratio)

  • Certified letters from accountant or tax preparer- confirming business is still in existence 

**not all lenders will ask for this information, depending on situation and they may even ask for documents not listed- Just to give you an idea what to gather

Tips to keep in mind prior to applying for a mortgage:

  • Non-cash expenses can be added back such as in amortization and depreciation along with business miles, and home office usage. Of course, speak with an accountant for more information on how this works or even if you qualify for this option. 

  • Claim your rental income! -You might think you are avoiding paying taxes but in reality you are hurting yourself. If you are trying to build a real estate portfolio, not only is it the right thing to do but you’ll be surprised how much you can actually write off that we can add back in as income when calculating the net rental income. Rental income is documented as schedule E income. 

Make sure you have all of your documents on hand and ready to be sent over to your lender🗂️. The sooner you provide them with all the information the sooner you are on your way to getting approved then the fun can begin…House hunting of course 🙂

Want to start the process now or inquire for more information based on your financial situation?  On the right of your screen you will see a form that just takes 60 seconds of your time or give us a call at (407) 330-7566

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