Self-Employed Loans: The Ultimate Guide to Getting a Mortgage When Your Self Employed

Hey there! Alex MacLagan the Mortgage Doctor. As a self-employed mortgage broker, I know firsthand how hard it can be for entrepreneurs and freelancers to get approved for home loans needing only tax returns or pay stubs.

That’s why today I’ll be focusing on specialized mortgage programs called self-employed loans – designed for borrowers just like you!

Specifically, we’ll cover:

• What self-employed/bank statement loans are
• Why they help self-employed borrowers
• What key options and requirements exist

Let’s do this! Time to unlock financing approval when self-employed!

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Self-Employed Loans Explained

Self-employed loans allow underwriting using bank statements rather than tax returns or pay stubs. This also makes them called bank statement loans.

The key options include:

• Bank statement loans – uses personal bank statement deposits
• Asset depletion loans – uses asset balances being spent down
• Profit & loss loans – uses P&L statement revenue/expenses

So in short, self-employed loans open up mortgage approval to borrowers that may not qualify through traditional channels like FHA loans, VA loans, or conventional loans.

Making them an ideal fit for:

• Self-employed borrowers
• Business owners
• 1099 & contract workers

Who don’t have W-2s or enough tax return income to prove eligibility otherwise.

Why Self-Employed Loans Work

These programs analyze your bank statement deposits rather than tax return income or pay stub wages to underwrite.

This helps in cases where your tax returns:

• Show limited or inconsistent income
• Don’t reflect current earnings potential
• Have expenses lowering your net profit

For example – as a rideshare driver you may deposit $5k/month consistently. But tax write-offs lower your return income, so deposits demonstrate earning ability better.

Bank statement loans would help approve based on those deposits!

Resulting in easier qualification for mortgages when self-employed! 🙌

Self-employed loans can mean celebrating that hard-to-get approval!

Key Self-Employed Loan Types

Now that you know why these loans help, let’s overview some of the top specific offerings I can provide for self-employed borrowers:

Bank Statement Loans

These allow qualifying using the deposits shown on your bank  statements. You can submit your personal or business bank statements

Requirements:

• Minimum 620 credit score
• Down payments as low as 15%
• 12 or 24 months of personal or business bank statements
• Statements evidencing consistent deposits

Upsides

• Simple eligibility analysis
• No tax returns or pay stubs needed
• Uses actual deposited income

Downsides

• Higher rates than conventional loans
• The expense ratio can be as high as 50% (This will lower your income by this percentage)

Asset Depletion Loans

Asset depletion loans use the value of your liquid assets, such as savings, stocks, bonds, etc to calculate your gross monthly income. This way you do not need to use tax returns or pay stubs for your income.

Requirements:

• 24 months of asset statements
• No requirement for minimum remaining reserves

Upsides

• Allows even very inconsistent income
• Best option for some business models

Downsides

• Requires substantial starting reserves to deplete
• Higher rates than conventional loans

Profit & Loss Loans

These loans look at the revenue and expenses on your business Profit and Loss Statements.

Requirements:

• 12 or 24 months of P&L docs
• CPA-prepared reports hold more weight

Upsides

• Uses real-time revenue data
• Helps rapidly growing businesses

Downsides

• Still scrutinizes business performance
• Expenses can muddy approval ability

Ready to Apply for a Self-Employed Mortgage?

Hopefully this clarified why bank statement loans can be ideal for qualifying when self-employed – plus your unique options.

Just remember key benefits like analyzing deposits rather than returns or pay stubs.

And the flexible requirements around using statements from personal or business accounts.

For expert guidance selecting the optimal path for your unique financials, connect with me directly! I can run the numbers and rates on custom self-employed loan packages tailored to your needs.

Time to take that first step toward finally getting approved!

Reach out and let’s chat!