Self Employed Benefits

Self Employed Mortgages

It goes without saying that being self employed has a number of benefits. After all you can write off all your deductions on your taxes. You are your own boss and you can make more money than people who are employed by someone else. But there are times when there appears some trouble with being self employed. Getting finance for a home is one such time. But let us discuss a few things that you should know that might make the whole process of self employed mortgages a little bit easier if you are self employed.

The very first thing that you would have to face would be income verification if you are thinking of mortgages for the self employed. There are lenders who would like to see a history of self employment for 2 years. There are many who would ask for a 3 year history. And yes, the history must be verified through tax returns being filed. There are some lenders who would calculate your income as the average income you claimed on your income taxes as profits rather than your gross income from business. Different lenders have different criterion. Some would take your income as the lowest of the tow years while some would take as the highest of the two years.

So, what would be the best course of action? Obviously, talking to your lender or the mortgage broker would be the best option and asking which way they verify. Sometimes a portion of your write-offs or deductions would be included back into your income. Always remember one thing. If there is some process that could be used to verify your income, your lenders would surely make use of it. And as for what you should do, you should show as much income as you can.

You can always make use of bank statements as your income proof. There would be lenders willing to accept bank statements of one or two years as income proof. Actually this is a fairly common way of verifying income and perhaps a lot better way than checking your tax returns as with a little bit of planning you can always show a lot more cash flow than tax returns would ever show.

There are a few types of loans where you won't have to show any proof of your income. You would only have to fill a form stating about your income and there is no need to show any proof. This really proves useful in situations when you are self employed and have been doing quite well in the present. There is no need to calculate your average income from the past two years. Your present income should do. But yes, even then always be honest in telling about your current income. They can easily get it verified from the IRS.

With a stated income loan, your credit score and down payment is always on the line. So, you need to have these factors really strong or at least anyone of them. And finally, the interest charged in stated loans is generally higher but understandably because of higher risks.

The contents of this page are for informational purposes only and not given as advice. Contact your tax or financial advisor for specific direction and advice.

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