Self-Employed Mortgage Loans: Determining Which One is Right for You

Self-employed mortgage loans are specific to freelancers, business owners, and contractors who are looking to buy a home. Essentially, self-employed mortgage borrowers can apply for the same loans as W-2 borrowers can, such as FHA, VA, and USDA loans.

Are there special requirements for the self-employed to get a mortgage loan?

No, but you need to document steady, reliable income. Self-employed borrowers (1099 borrowers) need to prove their cash flow, which may require more paperwork than a W-2 borrower.

Is it harder for a self-employer to get a home loan?

No, because you are held to the same credit, debt, income, and down payment standards as other applicants.

Today, we will examine self-employed mortgage options.

BEST SELF-EMPLOYED MORTGAGE LOANS

VA Loans for Self-Employed

Offer by the Department of Veteran Affairs (DVA) to veterans, service members, and surviving spouses
Should always be your first choice of home loan if eligible
Lowest interest rates of home loans with no ongoing mortgage insurance
Lenient requirements
Minimum credit score of 580
At least two years employment in current role OR one year self-employment with a two-year related work history

Does this loan apply to you? Contact a self-employed mortgage consultant at BrightPath to get started today.

Self-Employed Mortgage Loans from the USDA

Available through the U.S. Department of Agriculture (USDA)
Require no down payment with below-average market mortgage rates
Qualify for USDA financing with a(n):
30-year, fixed-rate mortgage
Credit score of at least 640
Low-to-moderate income
Proof of single-residence property in a rural area
Two-year history in your current role OR at least one year self-employment with two prior years in a related role
Income no higher than 15% above the area median

Shockingly, under USDA definition, the majority of the U.S. landmass qualifies as a rural area.

Does this loan apply to you? Contact a self-employed mortgage expert at BrightPath to get started today.

SELF-EMPLOYED BUYING A HOUSE

FHA Loans for the Self-Employed

Insured by the Federal Housing Administration (FHA) for property used as a primary residence only
Best for low-credit and first-time home buyers due to their more lenient requirements
Needs to be within current FHA loan limits
Down payment and closing costs cannot be from a business account
Are not a cash-out refinance
Qualify for FHA financing with a:
580 credit score or higher
5% down payment
Debt to income (DTI) ratio of below 50%
Two-year self-employment history OR one year self-employment history with two years’ income in similar role
One year of income in a similar role with one year of formal training or education can be qualifiable
Usually requires two years of personal and business tax returns (unless your personal returns show increasing income in the last two years)

Our loan officers will look at the following criteria to find the best choice of self-employed mortgage loans for you.

Credit history
Bank statements
Liquid savings and assets for your down payment and closing costs
Type of property you want (house, condo, etc.)

Most importantly, your projected use of the real estate (primary residence, vacation home, investment) will have an impact on the types of mortgage loans you qualify for as well as your interest rate.