{"id":251329,"date":"2025-05-22T01:22:41","date_gmt":"2025-05-22T01:22:41","guid":{"rendered":"https:\/\/peraltafinancing.com\/business\/real-estate\/what-are-the-best-mortgage-options-for-self-employed-borrowers\/"},"modified":"2025-05-22T01:22:41","modified_gmt":"2025-05-22T01:22:41","slug":"what-are-the-best-mortgage-options-for-self-employed-borrowers","status":"publish","type":"post","link":"https:\/\/fivemor.com\/?p=251329","title":{"rendered":"What Are The Best Mortgage Options for Self Employed Borrowers?"},"content":{"rendered":"


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Top Mortgage Products For Self Employed Borrowers<\/strong><\/span><\/h2>\n
\"What<\/p>\n

What Are The Best Mortgage Programs For Self Employed Home Buyers?<\/p>\n<\/div>\n

Do you remember when virtually anyone was able to get a mortgage without providing any documentation? No document loans or stated income loans were created in the 90\u2019s but really became mainstream after the year 2000.<\/p>\n

If you had a social security number and an average credit score, you were able to get these loans without documenting your income or your assets. Stated income loans required that you document your assets but merely \u201cstate\u201d your income without providing proof of that income.<\/p>\n

To some degree, lenders were pressured politically to provide these sub-prime mortgages so that more people could qualify to buy a home. Lenders originated stated income loans<\/a> and those unsafe mortgages were packaged together and sold as highly rated investments. When the mortgages foreclosed, the investments failed. This led to the mortgage meltdown and housing decline which began in 2008.<\/p>\n

How the Mortgage Meltdown Impacted Self Employed individuals<\/strong><\/span><\/h2>\n

In an effort to limit the availability of sub-prime mortgages, the Dodd\u2013Frank Wall Street Reform and Consumer Protection Act<\/a> was passed in 2010. This eliminated stated income loans completely. Borrowers then were required to fully document both income and assets on their mortgage applications.<\/p>\n

This was a huge blow to self-employed individuals who were looking to buy a home or refinance their existing mortgages. W2 wage earners can qualify for a mortgage using their gross earned income. Self-employed borrowers qualify based upon the net income on their tax returns.<\/p>\n

Most businesses take full advantage of the IRS guidelines for itemized deductions. These deductions reduce the net income to levels that make it nearly impossible for self-employed home buyers to qualify. It really is not fair when you think about it. Everyone has a mobile phone right?<\/p>\n

If you are self-employed and you write it off, it reduces the income used to qualify for a loan. Meanwhile, salaried borrowers do not have to adjust their income to account for the monthly cell phone payment.<\/p>\n

Impact on the Real Estate Market Nationally<\/strong><\/span><\/h2>\n

There are so many factors that contribute to the health of the real estate market. In this NY Post Article<\/a>, the author states that by 2020 there will be 42 million self-employed people in the US. That number is projected to be 25% of working Americans.<\/p>\n

If there were virtually no mortgage options for 25% of the working population, then just imagine what that would do to the housing market. These individuals would either be stranded within their current living situations or prices would be driven down based upon their ability to solely qualify for much less expensive homes.<\/p>\n

Therefore, alternative loan options that make sense are vital for the housing market.<\/p>\n

Best Mortgage Option for Self Employed Borrowers<\/strong><\/span><\/h2>\n
\"Top<\/p>\n

Top Mortgage Options For Self Employed Borrowers<\/p>\n<\/div>\n

The world of creative lending identified the opportunity to come up with a program that can help. It had to be something different than the old stated income or no document loan programs since the Consumer Protection Act was passed. A few lenders developed a program called bank statement loans<\/a>.<\/p>\n

This new loan program requires business owners to provide 12-24 months bank statements to be used as proof of income. The lenders essentially use the average monthly deposits as qualifying income. Assets are still required to be fully documented.<\/p>\n

Bank Statement Loan Requirements<\/strong><\/span><\/h2>\n

Borrowers must be self-employed<\/strong>\u00a0for a minimum of two years<\/strong><\/span><\/h3>\n

You will be asked to provide one or more of the following\u2026<\/p>\n