The Home Buying Experience

Purchasing a Home When You’re Self Employed

Jet Direct Mortgage

Self-employment is becoming a growing trend in the United States. Freshbooks predicts that by 2020, roughly 27 million United States residents will be leaving full-time jobs for independent, client based work. This will bring the total number of self-employed workers to about 42 million. Although there are numerous benefits to being self-employed, buying a home might not be one of them.

What to Provide

In order to obtain a mortgage, you’ll almost always be required to show at least 2 years worth of steady income. This is to prove to the lender that you will be able to make the payments on the mortgage. Self-employed professionals will want to provide as much income history as possible. This will include 2 years worth of tax returns, debts, assets, and if you’re a business owner, profit and loss statements.


This is where it can get tricky for those who are self-employed. A lender is going to check your income after deductions. It’s common for self-employed workers to write off a large chunk of income under business expenses. This could affect the size of the mortgage you will be able to take out. If you write off too much, your taxable income may not be large enough for you to qualify for the mortgage you desire.

Debt-to-income ratio

In most situations, a lender will not provide you with a mortgage if your debt-to-income (DTI) ratio is higher than 43%. So if more than 43% of the money you make is being used to pay off existing debts, you probably won’t qualify for a mortgage. DTI is a very important aspect of qualifying for a mortgage, and is made even more important when dealing with self-employed workers. Make sure you stay on top of your finances and try and keep your DTI below 36%.

Credit Score

This is one of the biggest factors in determining the conditions of your mortgage. If you have a lousy credit score, you’re going to get a poor rate on your home loan. It is recommended that potential buyers do a soft check before applying for a mortgage. This will allow you to see where your score is currently at, giving you an opportunity to handle any outstanding debts that may be negatively effecting your score. Source: