<img height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=905697862838810&amp;ev=PageView&amp;noscript=1">

Subscribe

    Homebuying & Selling | 2 min read

    Self-Employed? Here's the Documentation You Need to Buy a Home

    Owning a business is the American dream for many people. After all, who doesn't want to be the next Steve Jobs or Mark Zuckerberg? And while being self-employed comes with a unique set of perks, it also requires some unique steps in the homebuying process. Because self-employed individuals typically have income that fluctuates and debts that could be tied to their business, lenders will require additional pieces of documentation, but don't let this deter you from realizing the dream of home ownership! If you are an entrepreneur and want to purchase a home, keep reading to learn the types of documentation you may need, as well as any obstacles that could get in your path so that you can properly prepare.

    While the actual homebuying process including the application, rate qualification, credit and income requirements, underwriting, etc. are the same for both self-employed and employed homebuyers, the documentation aspect of the process is relatively different. Whereas someone who is employed for a corporation can access their W-2 forms and get proof of employment, self-employed employees will have to provide a few more pieces of information to their lender in order to accurately assess their true financial picture.

    In general, all borrowers and co-borrowers, if applicable, are required to submit the following:

    • A driver's license or government-issued photo identification

    • Birth date

    • Social security number

    • Bank and liquid asset account statements

    • Address information for the previous two years

    • If a current homeowner, loan information

    Tax Returns

    Self-employed applicants typically must submit at least two years' worth of federal tax returns, as opposed to one year for employed applicants.

    Profit and Loss Statement

    A profit and lost statement, commonly referred to as your P&L, provides a comprehensive snapshot of the revenues, costs, and expenses that your business incurred over a period of time. Since business owners may typically not receive traditional paychecks to validate income, the P&L provides lenders with the information they need to understand if a business is profitable. That impacts how the lender views the financial standing of the business owner/borrower. 

    Statements

    While bank and financial statements are required from all borrowers, self-employed applicants are required to submit statements from both their personal and business accounts. Again, lenders want to accurately assess your full financial picture, including personal and business debts and liabilities. To help make things as clear and uncomplicated as possible, avoid mingling expenses between the accounts. 

    Partnership Tax Returns

    If more than 25% of your business is owned by another individual or entity, your lender will require copies of the previous two years' corporate/partnership tax returns.

    Getting a mortgage approval while being self-employed is certainly not impossible, but it will require some diligence and copious recordkeeping to ensure you can answer any and all questions regarding the health of your business. Like all potential mortgage applicants, one of the first steps to ensuring you're on the right path to homeownership is to seek out a mortgage loan officer that is knowledgeable and available to answer all of your questions. A good loan officer will partner with you from start to finish, ensuring you know exactly what documentation you need and keeping you informed of any potential challenges that you may face along the way.

    Fina a Pro

    Related Categories

    Homebuying & Selling

    Marcia Messer

    Marcia Messer is a Loan Officer with SWBC Mortgage. She works tirelessly to help her clients achieve their goal of home ownership and is committed to making the experience positive and memorable. NMLS #: 222428

    You may also like:

    Homebuying & Selling

    Homebuying 101: What to Look For During Your Final Walk-Through

    First-time homebuyers—and even buyers with more experience—often don’t realize how vitally important the final walk-thro...

    Homebuying & Selling

    Closing on Your Home Loan? Here's What to Expect

    First of all, congratulations! Buying a house is not always a simple process, but if you’re at the point of closing on y...

    Homebuying & Selling

    5 Reasons Military Veterans Should Use a VA Loan to Finance Their Home

    As a veteran, you have worked hard and made unimaginable sacrifices to protect our country and our freedom. It's only fa...

    Let Us Know What You Thought about this Post.

    Put your Comment Below.

    icon

    Let us help you find the Happiest Way Home!

    Finding a home loan that's right for you doesn't have to be complex.

    Learn More