According to a 2020 Gallup report, there are about 44 million Americans who are self-employed. This number includes freelancers and contract workers. It is quite possible that due to the state of the world in the past year, that this number increases for 2021. Since this number is so high, there are a number of special mortgage programs that exist to help these individuals purchase a home or refinance their current home.
In order to qualify for a home loan, you need proof of at least two years of income. For some individuals, this may be difficult – especially for someone who only has one year of income as a self-employed individual behind them. Bank statement loans are an option for these individuals as neither a W2, nor past year’s tax returns are required. For a bank statement loan options, an underwriter will verify your monthly income by looking at your deposits from your recent bank statements. They will need a minimum of 12-24 months of bank statements, along with other required documentation.
Besides bank statements, you will also need to provide a significant down payment, prove you have savings, a good credit score, a debt-to-income ratio below 55%, a profit and loss statement, and a business license. The business license is only required if it is something needed for your line of work. You will also need a letter for either your accountant or a licensed tax professional that confirms you have filed your taxes properly while being self-employed.
Keep in mind that just because you are self-employed, does not mean this is your only option for a mortgage loan. You can apply just like someone who has a W2. Many self employed individuals tend to write a lot of items off for tax purposes – which is not helpful when applying for a mortgage.
If you fall in this category, we would be happy to help you!