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Getting a Mortgage When You Are Self-Employed: A Comprehensive Guide

Getting a Mortgage When You Are Self-Employed: A Comprehensive Guide

Congratulations on taking the leap into entrepreneurship! Being self-employed comes with many perks, from setting your own schedule to pursuing your passions. However, when it comes to getting a mortgage, being your own boss can present some unique challenges. Don't worry, though – with the right knowledge and preparation, you can successfully navigate the mortgage process and secure financing for your dream home. Let's dive into everything you need to know about getting a mortgage when you are self-employed.

Understanding the Challenges

When you're self-employed, your income may fluctuate from month to month, making it challenging for lenders to assess your financial stability and ability to repay a mortgage. Additionally, self-employed individuals often take advantage of various tax deductions and write-offs, which can further complicate the process of verifying income for mortgage purposes. However, with proper documentation and preparation, you can demonstrate to lenders that you're a reliable borrower worthy of a mortgage.

1. Build a Strong Credit Profile

As with any mortgage applicant, having a strong credit profile is crucial when you're self-employed. Lenders will scrutinize your credit history and credit score to assess your creditworthiness and determine your eligibility for a mortgage. Aim to maintain a good credit score by making timely payments on your debts and keeping your credit utilization low.

2. Organize Your Financial Documentation

One of the key challenges self-employed individuals face when applying for a mortgage is providing sufficient documentation of their income. To streamline the process, gather all the necessary financial documents upfront, including tax returns, profit and loss statements, bank statements, and any other relevant paperwork. Be prepared to provide documentation for at least two years to demonstrate a consistent income history.

3. Prepare a Detailed Profit and Loss Statement

In addition to your tax returns, lenders may request a detailed profit and loss statement to verify your income as a self-employed individual. This statement should outline your business revenue, expenses, and net profit over a specific period, typically the past two years. Providing a thorough and accurate profit and loss statement can help lenders gain confidence in your ability to repay the mortgage.

4. Minimize Deductions in the Year Before Applying

While taking advantage of tax deductions is a common practice for self-employed individuals, it can also reduce your taxable income, making it challenging to qualify for a mortgage. In the year leading up to your mortgage application, consider minimizing deductions or deferring certain expenses to boost your taxable income and improve your chances of mortgage approval.

5. Save for a Larger Down Payment

Another way to strengthen your mortgage application as a self-employed borrower is to save for a larger down payment. A larger down payment can reduce the lender's risk and improve your loan-to-value ratio, making you a more attractive candidate for a mortgage. Aim to save at least 20% of the home's purchase price for a down payment, if possible.

6. Consider Working with a Mortgage Broker

Navigating the mortgage process as a self-employed individual can be complex, so consider working with a mortgage broker who specializes in working with self-employed borrowers. A mortgage broker can help you navigate the application process, identify lenders that are more lenient towards self-employed individuals, and find the best mortgage product for your needs.

7. Be Prepared for a Lengthier Approval Process

Due to the additional documentation required for self-employed borrowers, the mortgage approval process may take longer compared to W-2 employees. Be patient and proactive in providing any requested documentation to expedite the process and keep things moving forward.


While getting a mortgage when you are self-employed may pose some challenges, it's entirely possible with the right preparation and documentation. By building a strong credit profile, organizing your financial documentation, and working with a knowledgeable mortgage broker, you can successfully navigate the mortgage process and achieve your dream of homeownership as a self-employed individual.

[Bankrate - Mortgage Rates]( | [NerdWallet - Mortgage Guide for Self-Employed Borrowers](

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