The Self-Employed Homebuyer

Have you ever heard the rumor that buying a home (or getting any kind of loan) when you work for yourself is inherently harder to do? Admittedly, it’s true that someone who is self-employed has to jump through more hoops than a traditional person with a W-2… but that doesn’t necessarily equate to less likelihood of being approved. 

Just ask the 14 million nontraditional earner homeowners! Those extra hoops to jump through really just mean being ridiculously organized and completing some additional paperwork. After all, lenders want a guarantee that you’ll be able to repay what you’re borrowing. 

The Basics

Just like other borrowers, lenders will want to see a slew of numbers from you: your income, your assets, the debt-to-income ratio you hold, and your credit scores. Because self-employed people don’t always have consistent monthly or annual income, lenders will likely ask additional questions to ensure a guaranteed income level to match your loan. However, self-employed borrowers are eligible for all the same loan types as traditionally employed earners. 

Since lenders want to see an income guarantee, expect to share at least two years worth of income history. This could be two years worth of 1099 statements from an accountant or, depending on how you structure your finances, two years worth of bank statements. Perhaps you’re a licensed freelancer; lenders may want to see copies of your license as proof of how long you’ve been working for yourself. 

Ultimately, lenders just want to see that your income is stable. Are you a gig worker? Seasonal worker? Barista working for tips? All of the above? All income counts as income, so be sure to track and share all relevant information. 

Of course, that anxiety of possibly being denied a loan exists for both traditional and nontraditional mortgage applicants. If, for whatever reason, your loan application is denied, it could be for a variety of reasons (not simply just being self-employed). Perhaps your debt-to-income ratio is too high. Trust us- this happens with traditional borrowers, too. Visit Realtor.com if you’re looking for ways to improve your finances as a self-employed person applying for a home loan.