It is generally more difficult to qualify for a mortgage and purchase a home for entrepreneurs and other self-employed individuals. This is despite the fact that mortgage lenders consider the same qualifying mix of income, assets, and credit. So why is this?
In a nutshell, the answer to this question is that, qualifying income for self-employed individuals is much more scrutinized. The fact of the matter is that self employed income streams are much harder to predict.
Business income constantly fluctuates whereas a person who is receiving a salary always gets paid the same. This results in lenders seeing this type of employment as more risky. As a result, more documentation is required.
What income documents should you be prepared to provide?
- Last 2 years of Personal Tax Returns
- Last 2 years of Business Tax Returns (If Schedule C no separate business returns required)
- Year to Date Profit & Loss Statement
- Year to Date Business Bank Statements
How do I prove employment for myself?
In general, to start the home buying process, you’ll need a two-year history of uninterrupted self-employment income. Employment verification for entrepreneurs can come in all shapes and sizes:
- A letter from licensed certified personal accountant (CPA)
- Any state or business license that you hold
If you have any questions surrounding the mortgage application process as an entrepreneur, please don’t hesitate to contact us at (760) 930-0569 and one of our loan officers will assist you.