The mortgage loan process is a complex one, but it can be especially challenging for those who are self-employed. If you are a self-employed individual looking to buy your first home, it's important that you understand how the mortgage application process will be different for you. Knowing the information that you'll need will help you go into the application process better prepared than you would otherwise be. Here are some of the things that you will need.
Financial Records
For self-employed individuals, most mortgage companies will want to see your last two years of tax returns as part of your financial information support. They will average the earnings over those two years to determine your income for the application's purposes. In addition to those tax returns, some mortgage lenders will also want to see income statements as well as profit and loss statements for the current year to date as a way to assess how your financial position is for the current year. Make sure you take the time to create those statements for the year to date before you apply so that you can provide them as part of your earnings support.
Business Validation
When you work for an employer, your lender can validate your active employment with a single phone call to the business. If you are self-employed, that's not an option. Instead, you'll be asked to provide a copy of your business license that proves that you have a valid business, or you'll have to show a current invoice or statement that clearly indicates that you are still actively and legally in business at the time of the application.
Bank Statements
Bank statements are a key way to validate your financial stability in order for you to buy a home. Your remortgage lender will want to see at least a year, but usually two years of bank statements, so start gathering them as soon as you know that you'll want to buy a house soon. The prospective lender will be looking to verify that you have the money for the down payment, the closing costs, and the first couple of months of your mortgage payment and other bills. This is important for showcasing stability and an ability to pay.
These are a few of the things that a self-employed individual should be prepared to offer as they apply for a mortgage loan. Talk with your mortgage broker today to see what other information they might require.
Share9 September 2022
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