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How to get a mortgage if you’re self-employed

You'll need to show steady income over two years to get approved.

Updated

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If you’re self-employed, you’ll need to demonstrate steady work history and recent tax returns to get a mortgage. And watch out for lenders who charge high interest rates for self-employed workers.

Can I get a mortgage if I’m self-employed?

Yes, but you’ll need to verify your income. Expect to provide your tax returns from the past two years, and some lenders may ask for bank statements showing your annual income.

Lenders want evidence of steady income, or even better, income that’s slowly increasing. If you made less than the previous year, that could hurt your chances of approval with some lenders.

How can I increase my chances of approval?

Lenders want to make sure you’re a creditworthy borrower and won’t default on the loan. Here’s some of what they like to see:

  • Good credit score of 620 or higher
  • Low debt-to-income (DTI) ratio
  • Consistent work history going back at least two years
  • Cash reserves that can cover several months of mortgage payments if your work slows down
  • Steady profits, if you own your own business

You’ll also need to produce documents to show proof of steady, reliable income going back a minimum of two year. Expect your lender to want to see the following:

  • Personal tax returns for the last two years
  • W-2s if your income is from your business
  • Business tax returns
  • Year-to-date profit and loss statements
  • Balance sheets

And if you own a business you may need to show:

  • A list of current clients
  • Your licensed, certified personal accountant
  • Membership to a professional organization
  • Any licenses you or your business may hold
  • Evidence of insurance for your business
  • Legal name of business

Example: John applies for his first mortgage

After three years working as a freelance writer, John is ready to buy his first home. He’s saved $10,000 and can cover the cost of his rent and monthly expenses with his income. The lender he choses looks at his post-tax income and feels confident he could afford monthly payments of $810.
This allows John to borrow $150,000 at an interest rate of 4.94% for 30 years. Since this was a conventional loan with closing fees, he chose to buy a smaller home and borrow only $135,000. This allowed him to make his monthly payments without worrying when his income fluctuates.

What to watch out for

Self-employed borrowers face unique benefits and risks when applying for a mortgage. Here are a few things to consider:

  • Higher fees and rates. Some lenders may charge you extra fees or higher interest rates if they perceive you’re a higher risk.
  • You may need an accountant. Lenders could request to contact an accountant to verify your income.
  • Risk of default. If your income fluctuates from month to month, you run the risk of defaulting on your mortgage after a slow month. Take out a mortgage you can comfortably afford and keep a savings account with a few months’ income if possible.

Compare mortgage lenders

Name Product Loans offered State availability Min. credit score
Axos Bank
Conventional, Refinance, Jumbo, Home Equity, Fixed, Adjustable, FHA, VA, USDA
Available in all states
620
Explore a full suite of home loan options with this direct online lender.
Morty
Morty
Conventional
AL, AR, CA, CO, CT, DC, DE, FL, GA, IA, ID, IL, IN, KS, KY, MD, ME, MI, MN, MS, MT, NC, NE, NJ, NM, OH, OK, OR, PA, SC, TN, VA, WA, WI, WV
680
Requires minimum credit score of 680 for conventional loans above $100,000 only. Not currently offering FHA, VA, USDA, Jumbo, or certain types of refinancing. A short online form presents you with multiple loan options and terms to choose from. Not available in every state: make sure you live in a qualifying state before applying.
Rocket Mortgage
Conventional, Refinance, Jumbo, FHA, VA, USDA
Available in all states
620
Streamline your mortgage from quote to final payment — all from your computer or phone.
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Compare up to 4 providers

Bottom line

If you’re self-employed and thinking about buying a house, you’ll need to jump through some extra hoops. Gather all of your financial documents before getting started and compare mortgages from different lenders to make sure you’re getting the best rate.

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