Different Mortgage Loans For Self-Employed People
Fortunately, in Texas, self-employed borrowers can apply for almost any mortgage available to other people. This implies you can qualify for mortgage loans for self-employed offered by Dream Home Mortgage.
Take a closer look at each of them:
- Conventional Mortgage Loans
Conventional mortgages have more stringent qualifying conditions but are often less expensive than government-backed mortgages. Some lenders may require a 3% down payment if you’re a first-time buyer. In contrast, you should anticipate paying for private mortgage insurance (PMI) if your down payment is less than 20%.
- FHA Mortgage
The Federal Housing Administration guarantees FHA loans, which typically only require a down payment of 3.5 percent. Because the government is supporting these loans, some lenders might be more inclined to approve them for self-employed people.
- VA Mortgage Loans For Self-Employed
Both current and former active-duty service personnel are eligible for VA loans. The time of your service determines the requirements. There is no down payment required for these loans because they can guarantee up to 100% of the loan. Your application can be more attractive to your lender if you have a VA home loan certificate of eligibility.
Additionally, Dream Home Mortgage is a reputable mortgage lender in the USA that offers loans to self-employed individuals. It also has other loan programs, such as a first-time home buyer program. Whether you want to know more about mortgage loans for self-employed individuals or other loan options, its professional staff provides answers to your queries. Its loan experts help you decide which loan option is more suitable for you according to your financial situation.
Steps To Get Mortgage Loans For Self-Employed Individuals
The loan approval process for self-employed applicants will resemble that of a W-2-paid applicant in specific ways. To confirm your income and demonstrate to the lender that you are a creditworthy candidate for a mortgage, you will need to present specific proof. Let’s look at which documents are necessary to get mortgage loans for self-employed individuals.
- Find Out Whether You Qualify As Self-Employed
You will be regarded as self-employed if you are the sole proprietor of a business or have one partner. Your taxable income, as reported on your individual 1040 federal tax returns, determines your loan eligibility. You are more likely to be classified as a freelancer than a paid worker if 1099 forms rather than W2s confirm your earned income.
Schedule C, which is used to disclose revenue or loss from a business you operated or a profession you practiced as a sole owner, likewise applies if your return contains it, according to the IRS. Self-employed people apply for a mortgage and own at least 25% of a firm or partnership. You can also be considered self-employed if you meet the following criteria:
- You operate your company as an independent contractor or sole proprietor.
- You are a member of a partnership that manages a business or trade.
- The majority of your money comes from a part-time business or from working as a gig worker.
If your gig is your primary source of income, a lender will give it greater weight even if you have a second, part-time work with a W2.
- Prepare A Brief Description Of Your Business
Depending on the type of work you do, the reliability of your income may be more of an issue than its amount. Although a comprehensive business plan is optional, it could be beneficial to draft some documents demonstrating the state of your sector and explaining the demand for your services. Therefore, offer tax records or reports that demonstrate income development and connections to a reputable website to give an underwriter the impression that you are a successful and serious businessperson.
Additionally, provide any contracts or written agreements that state you are on retainer or will receive payment for a specific time. These facts persuade a lender that you can pay your mortgage each month.
- Arrange Important Documents To Show Lenders
Like a salaried employee, your lender will require proof of income. Simply put, you might need to take further steps to prove it.
You may require the following types of documents:
- Employment verification
- Copy of your business license
- Permits from the federal or state
- Any other records attesting to the start of your business
- Documentation of income
- Federal income tax returns for the previous two years, both personal and commercial
- Current profit-and-loss reports and bank statements for businesses
- Pay stubs
- Bank statements
- Financial statements
- Tax forms, such as a 1099 or W-2
- Pension account statements
- Retirement account statements
- Compare Different Lenders
When looking for the best mortgage lenders for self-employed people, consider a lender with experience in this area. You can evaluate the loan offers from several lenders.
Additionally, you may get the best mortgage loans for self-employed people from a trustworthy and knowledgeable lender like Dream Home Mortgage.
Furthermore, consider applying for FHA loans. Because FHA loans are government-guaranteed and reduce the lender’s risk, they might be a better option than conventional loans.
Wrapping Up
From FHA to conventional loans, there are different mortgage loans for self-employed individuals in Texas. However, you must provide proof of income and business descriptions to get these loans as a self-employed individual. Additionally, choosing an experienced lender is also crucial when applying for a mortgage. Therefore, compare different lenders and choose one with years of experience in this field, like Dream Home Mortgage. Its brilliant and professional staff assist you throughout your loan approval process. Thus, with Dream Home Mortgage, your self-employment is no longer a hurdle to getting a mortgage loan. So, start your loan approval journey by booking free consultation.