Self-employed borrowers traditionally face some challenges when buying a home. Thankfully, with self-employment and gig work becoming more common, it has also become easier to purchase a home when you work for yourself. Below are some tips that will help you do so quickly and smoothly.

1. Work with a flexible mortgage company. Avoid trying to work with a big bank on your home loan; they often turn away self-employed borrowers. Instead, work with a smaller mortgage company that offers the flexibility to accommodate you.
2. Document your business and income thoroughly. Be as thorough as you can documenting the nature of your business along with your business history and income. The more information you can provide, the more likely you are to be approved for a mortgage. In particular, you will need to be able to explain gaps in your income, or income fluctuations up and down throughout the year. If you have any long-term contracts, be sure to show those to the lender too, as they indicate a degree of stability for your business.
3. Apply for a self-employed borrower loan. At MMS, we offer a specialized loan product for self-employed borrowers. When you apply for it, you can use bank statements to document your income instead of a W-2.
4. Make sure you are ready for what the future may bring. Another challenge of buying a home when you are self-employed is that the life and work of a self-employed person can carry a degree of unpredictability. While that is also true for employees, if you get laid off from employment, you qualify for unemployment insurance (UI). If you are self-employed and run out of work, you do not. That means that even though your work may be stable right now, changes in the future may bring greater financial instability. You need to make sure you have a plan for how you will handle that situation if it arises. You will require a larger emergency fund than an employee would have, and realistic options for how you will either find new self-employed work, or a job as an employee.
5. Look for ways to make your borrower profile more competitive. Finally, one way you can improve your chances of qualifying for a competitive interest rate when you are self-employed is to enhance your borrower profile. You can do that by raising your credit score, and/or improving your debt-to-income (DTI) ratio.

It is typical for self-employed borrower loans to carry a higher minimum down payment requirement as well. So, you will need to be prepared to put down more than you would for many other types of mortgages.

Buy a Home with a Self-Employed Borrower Loan

Buying a home as a self-employed borrower can be easy when you work with the right mortgage company. If you are ready to begin, please call (248) 788-0800. We can help you buy a home in Farmington Hills, throughout Michigan, and in 14 other states.