Done For You Article- How To Get A Mortgage When You Are Self Employed

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SECRETS TO GETTING A MORTGAGE WHEN YOU ARE SELF EMPLOYED!

If you're self-employed and looking to purchase a home, you may be wondering how to qualify for a mortgage. The good news is that it's definitely possible, although it can be a bit more challenging than it is for those with traditional jobs. This article will cover the different mortgage options available for self-employed individuals, including non-QM options, and the requirements for Fannie Mae and Freddie Mac loans.

Mortgages for Self-Employed Borrowers

When you're self-employed, lenders will look at your income differently than they would for a traditional employee. Instead of relying on a W-2 form, they will typically look at your tax returns from the past two years to determine your income. This can be a problem if your income fluctuates significantly from year to year, as lenders will generally take an average of your income over those two years.

To qualify for a mortgage as a self-employed borrower, you'll typically need to provide two years of tax returns, along with other documentation such as bank statements and profit and loss statements. You'll also need to have a good credit score and a low debt-to-income ratio.

Non-QM Options

If you're having trouble qualifying for a traditional mortgage, there are non-QM (non-qualified mortgage) options available. These are loans that don't meet the standards set by Fannie Mae or Freddie Mac, but are still offered by some lenders. Non-QM loans are typically designed for borrowers with unconventional circumstances, such as self-employed individuals.

One type of non-QM loan is a bank statement loan. With this type of loan, lenders will look at your bank statements from the past 12 to 24 months to determine your income, rather than relying on tax returns. This can be a good option for self-employed borrowers who have a lot of write-offs on their tax returns that make it difficult to qualify for a traditional mortgage.

Another type of non-QM loan is a stated income loan. With this type of loan, you simply state your income on the application and don't need to provide any documentation to verify it. However, these loans can be risky for lenders, so they typically come with higher interest rates and fees.

Fannie Mae and Freddie Mac Requirements

Fannie Mae and Freddie Mac are government-sponsored entities that buy mortgages from lenders, which allows lenders to offer more competitive rates and terms to borrowers. To qualify for a Fannie Mae or Freddie Mac loan as a self-employed borrower, you'll need to meet certain requirements.

First, you'll need to have a two-year history of self-employment. This means that you need to have been self-employed for at least two years, although there are some exceptions for borrowers who have recently transitioned from traditional employment to self-employment.

You'll also need to have a good credit score, typically around 620 or higher, and a low debt-to-income ratio. Your debt-to-income ratio is the amount of debt you have compared to your income. For Fannie Mae and Freddie Mac loans, your debt-to-income ratio can't exceed 50%.

Finally, you'll need to provide two years of tax returns, along with other documentation such as bank statements and profit and loss statements. Fannie Mae and Freddie Mac loans typically require more documentation than non-QM loans, but they also come with more favorable terms and interest rates.

Conclusion

Qualifying for a mortgage as a self-employed borrower can be a bit more challenging than it is for those with traditional jobs, but it's definitely possible. If you're having trouble qualifying for a traditional mortgage, non-QM options may be worth considering. Just be aware that these loans typically come with higher interest rates and fees.

If you do qualify for a Fannie Mae or Freddie Mac loan, you'll generally get better terms and interest rates than a Non Qm Program

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