Tips For Getting A Mortgage When You're Self-Employed
Typically when you apply for a mortgage, the bank wants to see a W-2 and pay stubs. If you are self-employed, then you won't have these records of income. So, how do you go about getting a self-employed mortgage? Here are some tips and pieces of advice that will help you out.
Prepare a profit and loss statement.
In lieu of a W-2, most banks will want to see proof of how much money your business has made over the past few years. This is often best shown in a profit and loss statement. If you do not already have a profit and loss statement, meet with an accountant and have them help you generate one. The bank may have specific rules as to what this profit and loss statement must contain. So, it's a good idea to ask what these are before preparing the statement. For instance, the bank may require that the profit and loss statement lists income monthly, or that it lists expenses in order of date.
Apply at several banks.
Some banks are more "comfortable" lending to self-employed people than others. It's not always easy to know which banks are most favorable to self-employed people. So, your best bet is often to apply for a mortgage at several banks to increase your chances of a "yes" and of getting a good rate. Try to apply at different kinds of banks. For instance, you could apply at one credit union, a small bank, and then a larger, international bank.
Be willing to offer more information.
Banks often need to collect more information from people who are self-employed. This is not entirely their fault. They are required to comply with a lot of government regulations when lending to anyone, especially when lending to self-employed people. If the bank reaches out to you for more information or to verify the information you've already sent, don't be offended. Try to respond in as timely a manner as possible to these requests so the bank can move forward, promptly, with processing your mortgage. If you're applying with a partner, keep them in the loop so that whichever one of you has more time can correspond with the bank as needed.
Applying for a mortgage as a self-employed person can be a little cumbersome. But with the tips above, you can get approval. Talk to your loan counselor for more information and advice.