Follow Patrick Linkedin Facebook
Email Patrick Email
Financial
Jan 15, 2015

Will Being Self-Employed Affect My Ability To Secure A Loan?

Sponsored Content provided by Patrick Stoy - Mortgage Consultant/Owner, Market Consulting Mortgage

Realizing that the tax deadline is approaching at breakneck speed, I started to think about the differences between receiving a W-2 and being self-employed. Employees have the luxury of showing their prospective lenders W-2s or pay stubs to secure a loan. Individuals who are self-employed have probably heard that it will be harder for them to get a loan versus an employee.

That isn’t always the case, however. Being self-employed is not a barrier to securing a loan with favorable terms. As long as a borrower can provide two years’ worth of tax returns that show increasing net income, it should not be a problem to get purchase money. The income does not even have to be all that substantial, if it has increased.

The key point is that lenders will look at the net income on the tax return, not the gross income. This is a particularly important fact to consider at this time of year. While it may often be in a self-employed person’s best interest to maximize deductions and show the least amount of net income possible, that strategy could definitely sabotage any effort to get a loan.

There are a number of additional methods for increasing your chances of securing a loan if you are self-employed:

  • Eliminate other debts. Paying off car loans and credit cards will make it easier to get a loan. It could also help you qualify for a higher loan amount.
  • Have documentation ready. When applying for a loan you will need to fully document your income, whether it’s through tax returns from previous years, profit and loss statements, balance sheets, savings statements or other paperwork.
  • Bring a substantial down payment. Lenders appreciate the commitment it requires to accumulate a large down payment.
  • Maintain a coffer of cash reserves. Having cash available if things go south will make lenders happy.
  • Get a co-signer. A parent or relative who is willing to share responsibility will improve your chances.
  • Show a proven track record. Being able to prove your success as a self-employed individual will make lenders look at you more favorably.
But wait, I’ve only been in business a year! Don’t worry. If you have only been self-employed for a year it could certainly be possible to secure financing for a home, especially if it was a successful year. This actually brings me to another important point to consider if you are self-employed and shopping for a home, which is that it’s vital to work with a lender who is experienced in this area. 

As a mortgage broker, it is my job to exercise a little creativity if necessary and help identify a plausible solution for obtaining a loan. In the past this has meant working directly with accountants and tax advisers – basically whatever it takes to help people achieve their goals and facilitate increased levels of homeownership in our communities.

For a free consultation about your options, contact me and I’ll help you develop a strategy that is unique to your situation.

Patrick Stoy has 15 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.

Other Posts from Patrick Stoy

Mcm 14jan insight
Ico insights

INSIGHTS

SPONSORS' CONTENT
Ubs chadpearson headshotresized

Planning Towards A Smooth Transition: Eight Steps For A Business Transition

Chad Pearson - UBS Decision Point Wealth Consulting
David webversion headshots march21 8172134246

10 STEPS TO PREPARE YOUR FACILITY FOR HEAVY STORMS

David Grandey - Highland Roofing Company
Mikestonestreetcropped 862150530

7 Mistakes HOA Boards Should Avoid Making

Mike Stonestreet - CAMS (Community Association Management Services)

Trending News

Market Street Shopping Center Under New Ownership

Cece Nunn - Sep 17, 2021

DBA, City Of Wilmington Discuss Creation Of Outdoor Social District

Jenny Callison - Sep 17, 2021

Area Startups Among Winners, Finalists Of NC Tech Awards

Johanna Cano - Sep 16, 2021

Geospatial Startup Maps Growth

Johanna Cano - Sep 17, 2021

WilmingtonBiz Talk: Talking Transportation

Vicky Janowski - Sep 16, 2021

In The Current Issue

MADE Winners: Supporter Business Category

Big Sky Shop + Studio is the winner in the MADE Awards Supporter Business Category....


Economist To Share Local Prognosis

“The way I’m thinking about the current situation is that it’s like taking a drug if you’re ill,” he said. “There’s the benefit in that it t...


Store Owners Share Basketful Of Hopes

Not only will it offer fresh, locally sourced meats, produce and dairy products, but the business will also have an open kitchen where baked...

Book On Business

The 2021 WilmingtonBiz: Book on Business is an annual publication showcasing the Wilmington region as a center of business.

Order Your Copy Today!


Galleries

Videos

Trying to Grow a Business?
2020 Health Care Heroes
2020 WilmingtonBiz 100