Chip Explains How to Securing a Mortgage When You’re Self-Employed

NORWOOD, Mass. - Sept. 19, 2014 - PRLog -- By Chip Poli, Founder and CEO of Poli Mortgage

It goes without saying that in order to secure a home mortgage loan, you must have some type of income. If you work for a company or organization, this is easy – a steady flow of income in incremental payments, perhaps monthly, weekly, or bi-weekly. If you’re self-employed, however, you might have some questions.

Here are a few answers:

What qualifies as self-employment?

An individual is considered self-employed if he or she has more than 25% ownership in an active business – or when he or she makes more than 25% of annual income in commission. Active businesses might include a corporation, partnership, or sole ownership. Individuals who receive 1099 income (such as an independent contractor or freelancers) are also self employed.

What about the paperwork?

As a self-employed individual, you will need to provide much of the same documentation as anyone else applying for a mortgage loan with a few additional documents:

·         An excellent credit rating (your lender will verify this)

·         Identifying information

·         Recent bank statements

·         Investment statements

·         Business Tax Returns (1065’s or 1120’s)

·         K1’s

·         Profit and Loss statements (not every situation)

·         1099’s

Being self-employed may also mean that you need to provide certain business records; your loan officer can provide you with details about what you might need to submit in order to prove the cash flow and profitability of your business. In cases of self-employment, loan underwriters may ask for additional information to prove that you are an acceptable risk for a loan, so be prepared for these requests.

Your lender or loan officer can help guide you through the paperwork necessary to secure a loan. Fannie Mae and Freddie Mac do require that you sign a Form 4506-T, these will authorize your lender to request tax transcripts. For self-employed individuals, we may also need to obtain tax transcripts on the business.

If you are self-employed and thinking of taking on a home mortgage loan, the best first step is to speak with a qualified loan officer who can lay out your options and take a look at your personal financial picture. Self-employment is widely varied, and depending on your circumstances, you might find yourself in the running for a more favorable loan opportunity than you might have imagined. It’s worth a conversation with a lender to find out exactly what those options might be for your given situation.