How to Get a Home Loan When You’re Self-Employed
With around seventeen million people in the U.S. working as self-employed individuals during 2017, it’s no wonder why the home loan market is changing in a drastic way. Since the 2008 market crash, it has been almost impossible for self-employed individuals to qualify for home loans via the traditional bank route. Fortunately, there are other ways that people who don’t fit into the financial qualifications box that can still obtain home loans.
If you’ve been looking into home loans, you probably know what banks expect from you – a W-2 and paystubs from your job. But, if you’re self-employed, chances are that you have little to no tax returns because of what you write-off every year. Don’t be alarmed, this is typical. Unfortunately, banks will most likely not give you a loan because of this.
With Bank Statement Home Loans, the process for loan qualification is different. Instead of requiring a W-2 and paystubs, Bank Statement Home Loans only needs to look at your bank statements (personal and/or business). Although the process does take a bit more time, (approx. 30 days) all files are reviewed manually. So, you know that you are having a real person reviewing your paperwork and making informed decisions about your loan versus a computer somewhere.
Before this product was conceived, private or mom and pop lenders would be self-employed peoples only opportunity for obtaining a home loan. Problem is, some of these private lenders were not following all of the federal rules and sanctions. Bank Statement Home Loans differs because it makes sure to follow all state and federal guidelines (Section 32 guidelines). This is important when buying a house and applying for a loan because you don’t want to put yourself in harm’s way because of other businesses who aren’t following the rules.
So, what should you expect?
During the qualification process, Bank Statement Home Loans will need to review three different things in order to qualify you for a loan.
1. Bank Statements: They take a look at your gross deposits over the previous year and divide it by twelve. The number that they end up with is your qualified income. If you’re married and you are self-employed, and your spouse isn’t, you would just have to prove income documentation for both. (W-2 and paystubs for your spouse, bank statements for you.)
2. Credit Score: The credit score that you will need will depend on the amount of qualified income you have, but unlike typical loans where banks will want to see a credit score above 680, with Bank Statement Home Loans, borrowers can have a credit score as low as 500 and still be accepted.
3. Property Qualification: The will need to take a look at the property that you are interested in buying. Like most home buying experiences, an appraiser will have to come out and appraise the property so that the reviewers of your file can properly determine whether or not you can qualify for the home.
Bank Statement Home Loans was created to help people who fall outside out of the typical job market. If you’re self-employed, have a low credit score, or an investor, taking advantage of these types of loans can make sense for you.