This depends.
As someone who is Self-Employed, you are able to write off business expenses which lowers your taxable income but the catch is it also lowers your qualifying income to obtain a mortgage.
Self-Employed homeowners have the same loan products available to them as non-Self-Employed homeowners (plus a few more), the main difference between the two is the qualifying income documentation provided.
Self-Employed homeowners usually provide their,
- Last 2 years of filed IRS Tax Returns, both Personal and Business returns, all pages and all schedules if ownership of company or companies is >20%
- Year To Date Profit & Loss Statement
- Most recent 60 – 90 Days Bank Statements
There are exceptions for those who have been in business for over 5 years that allow them to only provide their most recent filed IRS Tax Return versus the past 2 years. This is great for those who may not have had as favorable year two years prior as they did last year.
Please note there a few deductions that although reduce taxable income and thus qualifying income are allowed to be added back as income.
For example, depreciation. If a Self-Employed applicant shows a loss on their IRS Tax Returns such as Depreciation, a mortgage lender is able to add that back to their qualifying income.
So, if a Self-Employed applicant made $100,000 as Net Income but wrote of $50,000 in Depreciation then their annual qualifying income for loan approval would be $150,000.
If a traditional loan is not the best loan option right now, then consider a few of our non-traditional or Non-QM loan options specifically geared towards Self-Employed homeowners such as,
- Bank Statement Loans
- P & L (Profit and Loss) Statement Loans
- Down Payment Only and No Income Loans
- Asset Depletion Loans
- Newly Set-Up Trust Loans
Not sure what those loan programs are or mean?
No problem, simply search for them in our search bar and get to know about them or contact us and let us walk you through them, whatever is easiest for you and whichever you prefer.
