Are Self-Employed Mortgages The Same as Traditional Mortgages?
Mortgage options are diverse. Even within different types of loans, there will likely be variations from lender to lender. For self-employed borrowers, mortgage options might be more limited, but that doesn't mean that they are incapable of qualifying for more traditional mortgages. The differences between home loans for self-employed and more traditionally employed individuals are not as cut and dry as you may think. There are more factors at stake than just your employment, and depending on your individual circumstances, you may very well qualify for a "traditional" type of mortgage. One of the biggest points of confusion comes down to a longstanding myth. For some reason, many people think that FHA loans are off limits for self-employed borrowers, but that's simply not the case! The same is true for USDA loans, as well as VA loans.
In fact, the TYPE of mortgage you get is less about your employment status, and more about what's going to work with your budget, your documentation, how long you plan to live in the home, your credit score, and so on... It's not just whether or not you work for yourself. Instead of seeking specific types of loans, get all of your documentation and budgeting in order, then speak with trusted lenders to find the products and packages that fit. As a self-employed borrower, the process will likely be more involved, but that doesn't automatically disqualify you from certain types of loans.
Figure out how many years' worth of bank statements or tax returns you can provide. Take the time to get documents together about your business's profits and losses, write-offs, and how much you're paying yourself. Figure out how much you have for a down payment, what kind of interest rates you're willing to deal with, and how many years of mortgage payments you're willing to accept. Are you planning on living in this home for the foreseeable future, or just a few years? What's your overall debt-to-income ratio? All of this information is critical - more than just the nature of your employment. Under the right circumstances, a traditional mortgage might be exactly what you need! Because every lender is a little bit different, they're each going to have their own sets of standards and requirements. The more prepared you can be with documentation, expectation, and preferences, the more likely a lender will be able to find the mortgage product that checks all of your boxes.
More traditional types of loans may come with steeper costs, more strict requirements, and other hoops to jump through, but if you have all your ducks in a row, these obstacles don't have to prevent you from getting the most advantageous loan type. So, in short - traditional and self-employed mortgages are not the same... But they're not all that different either. It's more about the individual, the lender, and the sum total of unique circumstances. Get everything in order for yourself, and shop around! You might be surprised at the types of mortgages you can qualify for!