If you’re self-employed and are looking for a home, you may have realized that getting a mortgage can be a little trickier when you’re self-employed, a small business owner, or a commission-based employee.
Why Being Self-Employed Makes a Traditional Mortgage More Difficult
The biggest difference between a self-employed borrower and a traditional borrower is income verification. When you get a traditional mortgage, we verify your income with recent pay stubs and W-2 forms from the last two years.
When you’re self-employed, you don’t have W-2 forms that verify your salary.
In fact, if you’re like most business owners (and honestly, if you’re a smart one), you maximize your deductions and expenses when you file taxes, which can leave you with a lower income than you’d have if you were a standard salaried employee.
A lower income can put you at a disadvantage when we’re looking at how much of a house payment you can afford. To figure this out, we calculate your debt-to-income (DTI) ratio.
Your DTI ratio is your monthly debt divided by your monthly income.
For example, if you earn $6000 a month and owe a total of $1500 each month (including your new mortgage), your DTI is 25%.
Guild’s New Program for Self-Employed Borrowers
Guild Mortgage is committed to finding loan programs to help as many of our clients get into homes as possible, so we’re really excited about this new program that makes it easier for self-employed borrowers to get a mortgage.
This program is ideal for entrepreneurs, small business owners, and commission-based employees—basically, it’s for those without a traditional job and traditional income.
We have three options with this new program: 1) qualify for a loan based on your assets, 2) qualify for a loan based on 12 months’ worth of documents (instead of 24), or 3) qualify for a loan with 24 months of bank statements. We’ll help you figure out which of these options might work best for your situation.
This program includes purchases, refinances, and cash-out refinances.
There are a few things you should know about qualifying for this loan program.
- This program is for owner-occupied or second homes
- Homes can be single-family, 1-to-4 unit buildings, condos, or PUD (manufactured housing is not eligible)
- Minimum credit score of 680
- Maximum DTI of 50% (restricted to 43% in some circumstances)
- Loan amount between $100,000 and $1.5 million
- Borrowers must demonstrate that they have the ability to repay the loan with either assets or stable income that is likely to continue
- Income must be reasonable for the profession
Ready to Get Started?
We know it can feel challenging to get a mortgage when you don’t earn income from a traditional job. But we’re here to help figure out how to make it happen for you. If you’re ready to get started, we’d be happy to sit down and talk with you about how we can help.