I have been working with several self employed borrowers lately – the first question some ask is "can I even get a mortgage?". The easy answer is yes – depending on how long you have been self employed. Ideally you want to have at least two years of tax returns showing self employment income. However, Fannie Mae has made it a bit easier for some, there are some buyers that will get a requirement for only one year of tax returns (Freddie Mac has been doing this for awhile). We won't know that until we run it through the underwriting system, but for some buyers, that can make a huge difference! If your income for 2014 was lower than 2015, only needing one year of tax returns may make a difference in what you can qualify for in a new home.
There are some things to think about to make it easier for those that are self employed to get amortgage. The first thing to consider is how much you are going to write off on your tax returns. The more you write off for expenses, the lower your income. If you know you are going to be purchasing a home, you may want to lower your deductions to help you qualify for a new home. Talk to your loan officer and your CPA and decide what is best for you.
Review your tax returns and try and keep your income steady each year. If there are huge swings in income, it can affect what you can do. Also if your income is decreasing, it may make an underwriter think twice about approving your loan. Try to keep your income stable if at all possible.
Review your credit report – make sure your report is accurate. Some times there is information that is reported incorrectly to the credit bureau.
Try to keep your money for the down payment, closing costs and any other funds needed for closing in one account if possible. Ideally you will not be transferring money into and out of this account. Underwriters want to be able to document all deposits and if you are constantly transferring money in and out, it makes it much more difficult to verify.
Talk to your loan officer, make sure you bring in all your income documents (tax returns, K1's etc). That way your loan officer can help you make a decision about the best plan for you. It's not impossible to buy a home if you are self employed, we just need to be able to document your income!
Leslie Vanderwerf, NMLS ID#335509, American Mortgage & Equity Consultants, Inc, An Equal Housing Lender, NMLS#150953 - Email - Website
