Getting a mortgage can be tricky for anyone, but it can feel especially challenging if you’re self-employed. Lenders often require more paperwork and proof of income stability from self-employed borrowers. But don’t worry—with the proper preparation and a supportive mortgage company by your side, you can navigate the mortgage process smoothly. Continue below to discover how to get started.
1. Organize Your Financial Documents
As a self-employed borrower, you’ll need to provide detailed documentation of your finances. Here’s what you should gather:
- Tax Returns: Lenders usually ask for the last two years of personal and business tax returns.
- Profit and Loss Statements: A year-to-date profit and loss statement and balance sheets help show your business’s financial health.
- Bank Statements: Provide personal and business bank statements for the past few months.
- Income Statements: Any 1099 forms or other income documentation can help verify your earnings.
2. Improve Your Credit Score
Your credit score is a significant factor in securing a mortgage. Check your credit report for errors and work on improving your score. Pay down existing debts, make timely payments, and avoid taking on new debt before applying for a mortgage.
3. Save for a Larger Down Payment
A larger down payment can make your application more attractive to lenders. Aim to save at least 20% of the home’s purchase price. This can also help you avoid private mortgage insurance (PMI) and possibly get a better interest rate.
4. Show Consistent Income
Mortgage lenders want to see consistent and stable income. Make sure your income documentation shows steady revenue over the past two years. If your income fluctuates, be prepared to explain why and provide supporting documentation.
5. Minimize Deductions
While deductions can save you money on taxes, they also reduce your reported income, which might affect your mortgage application. Before applying, consider minimizing your deductions for a year or two to show higher income on your tax returns.
6. Get a Letter from Your CPA
A letter from your certified public accountant (CPA) can boost your credibility. The letter should verify your self-employment status, the stability of your business, and your income history. This can give lenders extra confidence in your financial stability.
7. Consider a Stated Income Loan
If traditional mortgage options are challenging, you might look into stated-income loans. These loans are designed for self-employed borrowers who can’t provide traditional proof of income. However, they often come with higher interest rates and stricter terms.
8. Work with a Mortgage Broker
A mortgage broker can help you find the best loan options for self-employed borrowers. They can guide you through the process, help you understand your options, and connect you with lenders who are more flexible with self-employment income.
Contact Homespring Mortgage for Further Charleston Mortgage Guidance
Navigating the mortgage loan process as a self-employed borrower can be complex, but it’s entirely doable with the proper preparation. With the tips above, you can secure the mortgage you need to buy your dream home. HomeSpring Mortgage is happy to help self-employed borrowers find the right mortgage solutions.
Contact us today to learn more about how our experienced mortgage lenders can help you navigate the mortgage process in Greater Charleston, South Carolina.