Navigating the home-buying process as a self-employed individual may seem challenging, but with the right knowledge and strategies, you can find your way to your dream home. Being self-employed offers flexibility and independence, but it can also come with unique complexities when it comes to securing a mortgage. In this blog, we will explore what you need to know about being self-employed and house-hunting, as well as provide you with actionable steps to make your homeownership dreams a reality.

First, let’s talk about what lenders look for when evaluating self-employed borrowers. Unlike traditional employees who receive a steady paycheck, self-employed individuals often have fluctuating incomes and expenses. Lenders typically want to see at least two years of consistent income from your business. This means that if you are in a new business or haven’t been self-employed for that long, it may be more challenging to qualify for a mortgage.

Trouble is that tax accounting is different because it employs accruals and deferrals in order to minimize tax liability.  The challenge arises when the financials are presented to the loan officer at the bank and the response comes back "you don't make any money".  Unfortunately that odd statement is very common.  I remember one client's response to a loan officer from a big bank, "Oh yeah, then how did manage to save up $500,000?"   

Another important factor is your credit score. A strong credit score can help you qualify for better mortgage terms. Make sure to check your credit report for any errors and resolve any issues that may affect your score. If your score needs improvement, consider taking steps to boost it before applying for a loan. This could include paying down existing debts, making payments on time, or having an item deleted from your credit bureau and minimizing credit inquiries.

While preparing your financial documents, it’s also wise to have a clear idea of your budget. Determine how much you can afford for a down payment and monthly mortgage payments. Self-employed individuals may often have more variable cash flow, so it is a good idea to build a budget that accounts for fluctuations in income. Aim to keep your housing costs within a manageable percentage of your monthly income, so you can maintain financial stability while enjoying your new home.

When it comes to the down payment, having a larger down payment can make you a more appealing candidate to lenders. If you can save up 20% of the home’s purchase price, you may avoid private mortgage insurance (PMI), which can save you money in the long run. Consider setting up a dedicated savings account for your down payment to keep your savings organized and focused.

Another advantage of being self-employed is that you may have access to different types of income that traditional borrowers don’t. For example, if you have income from multiple sources, such as freelance work or rental properties, be sure to document all streams of income. Lenders will take a holistic view of your financial picture, so presenting all your income sources can help strengthen your case.

However, don’t be discouraged! Nowadays there are many different types of mortgages available to you. For example non-qualified mortgage or non-qm loans accept other forms of income documentation like deposits from the last 12 months business bank statements or a profit loss statement.  Alternative income documentation like that has opened opportunities for self employed borrowers to buy homes that were previously out of reach.

Of course Conventional loans, FHA loans, and even VA loans offer benefits unique to their category and shouldn't be ignored and they have may have various requirements.  For example FHA and VA offer higher leverage up to 96.5% and 100% respectively.   so learning about these options can help you find the best fit for your situation. Each type of loan has its own criteria regarding credit scores, down payments, and other factors, so it’s worthwhile to gather knowledge on which loans align with your financial profile.

Once you’ve prepared your financial documents and set a budget, it’s time to start house-hunting! Begin by determining your must-haves and nice-to-haves for your future home. Think about factors such as location, size, and features that are important to you. This will help you focus your search and make the home-buying process more enjoyable.

Networking can also be a helpful tool during this stage. Speak to friends, family, and colleagues about your home search. They may know of properties that aren’t on the market yet or can put you in touch with real estate agents specializing in helping self-employed buyers. Finding an agent who understands the nuances of your financial situation can make a significant difference in your home-buying journey.

 Get pre-approved for a mortgage, this is a crucial step in having your offer accepted.  A pre-approval shows the seller that you are organized and certain aspects of your application have been reviewed and determined to be acceptable from a mortgage lender's point of view.  This process involves a lender reviewing your financial information and providing you with a letter stating how much they are willing to lend you. It can save you time and help you avoid falling in love with a home that might be out of your price range.

When you find a property you love, it’s time to make an offer. This is where having a knowledgeable real estate agent can be invaluable. They will assist you in determining a fair offer based on comparable properties in the area and the current housing market. Do not feel pressured to rush into a decision. Take your time to evaluate your options and ensure that you are making the right choice for you and your family.

Once your offer is accepted, you will enter the closing process. This can involve additional paperwork and financial reviews, but don’t worry; This is where I  will guide you through each step. At this stage, be prepared to provide any additional documentation your lender may request. This could include updated financial statements or proof of any additional income you may have earned since your initial application or a simple explanation of some sort is deemed necessary.

To sum it up, being self-employed and house-hunting may present unique challenges, but with careful planning and preparation, you can unlock the door to your new home. Remember to keep your financial documents organized, maintain a strong credit score, and seek out a knowledgeable real estate agent who can help you navigate the process.

If you’re ready to take the next step toward homeownership,  call me today at

800-663-1382 my name is Edward Schieber 

and I have been arranging loans for homebuyers since 2003.  I will be happy to discuss your specific needs and the things you need to complete your journey of home ownership. 

Let’s make your dream of home sweet home a reality!