Here’s what you need to know about choices when applying for a mortgage.
Today, Angie Shaw, a trusted friend and a lender at Fidelis Mortgage, joins us to discuss the process of obtaining a mortgage for self-employed individuals.
According to Angie, there is a common misconception that there is only one way to get pre-approved for a mortgage if you’re self-employed, which is by providing two years of tax returns or K-1 forms, depending on your business registration. However, there are several options available to pre-approve self-employed borrowers.
The more traditional approach involves presenting two years of tax returns, along with a year-to-date profit and loss statement. If you have a K-1 form, that will also be required, along with all accompanying schedules. These documents are used to calculate your gross monthly income, factoring in depreciation and other applicable elements. Then, the number is averaged over two years.
“A good lender will know all the intricacies of your application process.”
However, suppose you’re newly self-employed and don’t have the necessary tax return history. In that case, there are alternative programs to consider. For instance, if you’re purchasing an investment property, there’s a no-income-verification loan option where your assets and potential rental income from the new property are utilized to qualify you.
The key takeaway, particularly for self-employed individuals, is that it is critical to collaborate with a knowledgeable lender who understands the intricacies of these situations.
The pre-approval process takes several factors into account, including the potential for higher debt-to-income limits due to write-offs. Assets can also help offset debt-to-income ratios, providing another avenue for consideration. Therefore, contacting a local lender should always be your first step.
If you have any questions about financing, just reach out to us via phone or email. We are here to address your concerns and provide answers. We look forward to hearing from you.
