Self-employment is incredibly common these days. In fact, according to the Bureau of Labor Statistics, by the year 2026, a whopping 10 million Americans will count themselves as self-employed.
While this inevitably means more professional freedom and unlimited earning potential for many workers, it also has another consequence: It can be harder to get a mortgage loan.
Don’t fret, though. If you’re an entrepreneur, self-employed professional, or just toying with the idea of becoming one, you can still buy or refinance a home. The process will just be slightly different than you’re likely used to. Here’s what you need to know.
How the self-employed can get a mortgage
The majority of mortgage loans base their underwriting processes on documents like tax returns, pay stubs, and W-2s. Unfortunately, if you’re self-employed, some of these items just aren’t available (i.e., W-2s and pay stubs), while others (tax returns) don’t accurately portray how much you make due to write-offs and deductions.
Because of this, getting a mortgage can look a little bit different once you strike out on your own professionally.
For one, your lender will need to establish some sort of income trend. Since there are no pay stubs or W-2s to rely on, they’ll want to see the last 12 to 24 months of business bank account statements to gauge your average monthly income. Copies of some recent client invoices, as well as any 1099s you received for contracting work, will also help.
They’ll also likely want a profit and loss statement for your business (year-to-date), as well as any professional licenses or certifications you hold.
How to help your chances
Want to improve your shot at getting a mortgage as an enterpreneur or self-employed pro? Having all your documentation ready to go can help, as can having a good credit score.
A great credit score will offset some of the added risk you present as a self-employed borrower and could potentially get you a lower interest rate too
Paying yourself a regular salary is also a smart strategy, as it makes it easy for lenders to see exactly how much you take in each month and how much you can afford to spend on your mortgage.
Finally, increasing your down payment and having plenty in cash reserves are also good strategies when you’re self-employed. These both reduce the risk of you defaulting on the loan and can make a lender more likely to qualify you. (If you choose this route, aim for at least six to 12 months of reserves).
Self-employed and buying or refinancing a home?
Reach out to Park Cities to today to see what mortgage options you have as an entrepreneur or self-employed professional. We’re here to help.
Park Cities Mortgage is an Equal Housing Opportunity lender. Sponsored by NTFN, Inc. 5950 Sherry Lane, Suite 230, Dallas, TX 75225 | NTFN NMLS 75333.