Those who are self-employed may find that completing paperwork for a number of things, including loans and mortgages, is made more difficult by the fact that they often do not have a steady income or pay stubs to prove the income they do have. However, those who enjoy being their own boss can still easily purchase or refinance their homes if they have a good credit score and a way of proving their income.
Prior to the housing crisis, there were a number of different lenders willing to make loans to self-employed individuals without requiring documentation of their income. These loans are very rare now, but fortunately, self-employed individuals can often submit their tax returns as proof of income.
However, most self-employed individuals need more than just their tax returns. That is because many of them write off several business expenses, which leaves their income appearing to be much less than what it truly is. It also does not show any fluctuations in income or the fact that the borrower may be making much more now than they did the year before.
To counter this, many experts suggest that self-employed individuals start preparing their documentation two years prior to when they want to purchase a home. This may mean that they take less tax deductions for those years and create a documentation process for their income. This includes making quarterly profit and loss statements, working with a CPA, and keeping an updated ledger.
Moneytips can help you refinance your existing home loan.