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Getting qualified for a mortgage as a self-employed person takes some planning.

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Here is a quick list of things you'll want in order before applying.

To qualify for a mortgage as a self-employed person, you will need to: 

 

  • Make sure you have filed your personal and corporate taxes for the last 2 years. If you are a solo entrepreneur, then you may be filing just personally with a schedule C. Talk to your CPA.
     

  • Have your personal and corporate taxes in a PDF format for easy uploading to your lender. They will need ALL pages of the federal returns, no need for state returns.
     

  • You will need corporate returns to any business that you have more than a 25% interest in.
     

  • If you owe the IRS Money, have the canceled check or the bank statement showing the IRS has been paid.
     

  • If you owe the IRS money, and can’t pay it in full, show a payment plan set up with the IRS, and prove you have made at least 3 payments through your checking account.
     

  • Make sure you have your last 2 months' bank statements without any non sufficient funds.
     

  • Make sure your books are up to date. Sometimes underwriters will require an updated P&L. You should really want your books up to date anyway.
     

  • If you have company vehicles financed in your personal name, make sure you ALWAYS pay your vehicle payments out of your business account. If you have 12 monthly histories showing making these payments, they can be excluded from your debt-to-income ratios.
     

  • If you own multiple properties, have all your mortgage statements, property taxes, and insurance together for your lender.

Things to avoid:

 

  • Commingling personal and business funds. Get a business checking account and use it for business only.
     

  • Make sure you are not writing all your expenses off and showing a loss. You can add back depreciation to your income, but not expenses. You need to show income. Speak to one of our self-employed mortgage experts for more details.
     

  • Don't change banks. You want your banking history to show stability.
     

  • Don't buy a car or truck or any other form of transportation that you have to finance. Buying one increases your debt-to-income ratio, and that's something loan officers don't want to see.
     

  • Don't buy furniture on credit before buying your house. Like financing a car, charging big-ticket items increases your debt-to-income ratio and now is not the time.
     

  • Don't be late on your credit card payments or charge excessively. You need a track record of responsibility and show that you can manage your money.
     

  • Don't make large or cash deposits into your bank accounts. Lenders like the money that will be your down payment to be sitting in your account for at least two months - what they call "seasoning" - so that the funds don't just appear out of the ether. All cash deposits are required to be documented and sourced. Unless it’s a business account and it’s normal to receive large deposits.
     

  • Don't lie on your loan inquiry. Sounds simple, right? But don't leave out any debts or liabilities you have or fudge your income. It's fraud.
     

  • Don't co-sign a loan for anyone. Even if you're not the one making the payments on that loan, it increases your debt-to-income ratio.
     

  • Don't have inquiries made into your credit. Looking for new credit translates into higher risk for lenders. But opening credit accounts within a short period represents some threat, and your credit could take a hit. It's probably not a huge factor in your calculating your ability to repay a loan but why take a chance at this juncture?
     

  • Don't spend your money on closing costs. Part of the price of financing a loan is the closing costs, and you likely have some responsibility for paying them. Make sure you have enough for your share of the obligation

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