I enjoy answering reader questions that have been emailed to Lending Leaves. This one is something that is particularly close to my heart:
I am self-employed. I know that lenders often look at W-2s. Can I get mortgage financing without having a "regular" job?
The answer, I am happy to say, is "yes." But (and there always is one) it can require more work on your part. Even though you don't have W-2s, mortgage lenders still need to verify your income. This is especially important in this time of economic downturn, when mortgage lenders are wary of borrowers who may default later.
As a self-employed person who did get mortgage financing, I can tell you a little bit about the process. It involves an income audit. I wanted to use my year-to-date income rather than rely only on my tax returns (which didn't show a lot of income due to business expense deductions and included the half-year in which I started my business). An accountant had to go through my bank statements and verify my business income. He also had to put together a balance sheet.
This process was a bit expensive. But worth it because we were able to get a prime interest rate and keep a fairly low down payment. Also, it helped that my husband makes a little money as a student research assistant. Having a co-borrower that contributes W-2 income can be helpful in the process.
If you want to go alternate routes, there are options that allow you to have less documentation. But you may need a higher down payment or you may have to settle for a higher interest rate:
- Stated Income: You provide a statement (some mortgage lenders require some sort of witness or spot verification) of how much you make. You may need to provide clients, but you do not usually have to document all of your income.
- No documentation: These are getting few and far between (and may disappear if laws to require documentation are put into place) right now. But, basically, your income is not verified by the bank.
As you can see, there are options for the self-employed to get mortgage financing. It just makes the process a little more expensive and difficult. But I did it, and so can you.
image credit: sxc.hu
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