How to Get a Mortgage When You’re Self-Employed
If you’re a business owner or freelancer, you’re probably used to figuring things out for yourself—but when it comes to qualifying for a home loan, you don’t have to navigate the process alone.
To qualify for a conventional mortgage, borrowers typically prove their income using their W-2. But if you’re one of the millions of Americans who make their living as a contract worker, a freelancer, working multiple jobs or operating a small business, there are other ways to show you could be eligible for a mortgage.1
What Mortgage Options Exist for Self-Employed Borrowers?
Self-employed borrowers may be able to qualify for various loan types depending on how they can prove their income. You might be able to qualify for a more traditional loan type if you meet certain guidelines.
- Conventional Conforming Loan: This loan only requires a 3% down payment, if you can verify your income with two years of tax returns. These loans can be more difficult to get because they adhere to more stringent guidelines.
- FHA Loans: If you have less-than-perfect credit, you might be able to qualify for this loan and pay as little as 3.5% down. However, you’ll need to have worked for yourself for at least two years, own at least a 25% stake in your business, and have a strong debt-to-income ratio.
For many self-employed people, it might make more sense to get a non-qualified mortgage, which could allow you to prove your income without the help of a W-2 tax document.
What is a Non-Qualified Mortgage (Non-QM)?
A non-qualified mortgage exists outside of the requirements set by the Consumer Financial Protection Bureau. Because a non-QM falls outside of these stricter standards, they can flex to fit the needs of less traditional borrowers.
The Newrez Solution: Presenting SmartSelf
Newrez offers a series of non-QM loans, called our Smart Series. SmartSelf is our mortgage product tailored specifically to self-employed borrowers. SmartSelf is designed to make it easier for these borrowers to qualify for home financing so they can achieve home ownership.
How Does SmartSelf Work?
SmartSelf allows you the flexibility of qualifying for a loan using alternate means of income verification including:
- Bank statements
- 1099s
- Assets
- Profit-and-loss statements
SmartSelf also enables you to qualify with a higher debt-to-income (DTI) ratio, whereas traditional loans require a DTI of less than 43%.
Can I Get a Jumbo Loan with SmartSelf?
Yes, if you qualify. Because SmartSelf allows you to qualify with a higher DTI than a traditional loan, you may be able to get a jumbo-sized loan even as a first-time home buyer. SmartSelf also carries lower reserve requirements, meaning you don’t need to tie up as much cash in order to qualify for a jumbo loan. Eligible borrowers may be able to get a loan of up to $3.5 million.
Can I Use SmartSelf to Get Cash?
Yes, if you qualify. SmartSelf can be used to pull cash out of the equity you’ve built up in your home. You can use your home’s equity to†:
- Consolidate your debt
- Reinvest in your home by funding renovations or upgrades
- Cover business or education expenses
- Take a vacation
Find out if SmartSelf Makes Sense for You
At Newrez, we strive to be there for all sorts of borrowers. That’s why we provide options for folks who have less traditional forms of income. If you have any questions or want to learn more about our non-QM options, reach out to one of our loan experts today.
References:
1Employment Level - All Industries Self-Employed, Unincorporated (LNS12027714) | FRED | St. Louis Fed
This is not a commitment to lend. All loan programs are subject to credit, underwriting, and property approval. Programs, rates, terms and conditions are subject to change without notice. Other restrictions apply.