Historically self-employed borrowers have had difficulty qualifying for mortgages. Because Self-Employed workers or small business owners typically take advantage of tax code benefits, trying to qualify for a mortgage using tax returns can be very difficult. This type of loan enables self-employed individuals to purchase or refinance a home without having to provide tax returns, W2s, or other forms of documentation that are typically required when applying for a mortgage. Let’s take a closer look at some benefits of this type of loan.
No Tax Returns Required
The key benefit of this type of loan is that it does not require tax returns or W2s in order to approve your application. This makes it particularly appealing for self-employed individuals who may not have access to these documents or whose income fluctuates from year-to-year. As long as you can show consistent deposits into your business accounts over the past two years, you should be able to qualify for this type of loan.
NewFi Lending, has pioneered this new type of loan for self-employed individuals. This allows borrowers to use other methods of income documentation to calculate their monthly income to qualify for a mortgage.
How Do They Calculate Your Income?
Calculating self-employed income for a mortgage is based on your unique situation. They can combine W-2, 1099, and Bank Statements to calculate your monthly income. When using a 1099, they generally subtract an expense ratio of 10% and qualify you on the remaining 90% of income. If you have several forms of income, they can add all of the sources together to determine your average monthly income.
How Much Downpayment is Required?
Depending on your financial situation and credit rating your down payment can be as low as 10% on a purchase with a self-employed loan. Your mortgage rate will depend on a variety of factors including: your down payment, credit score, loan term, income, and debt. You can get mortgages for a variety of different types of properties with this type of loan including primary and secondary residences and even investment properties. And your credit score can be as low as 660.
For many self-employed individuals, a bank statement mortgage can offer numerous advantages compared with more traditional financing options. From lower down payment requirements and no need for tax returns or W2s all the way through to faster closing times, there are plenty of reasons why this could be an attractive choice if you’re considering buying or refinancing your next home. If you think that this could be the right option for you, make sure to check out what’s available today so that you can start taking advantage of all its benefits right away!
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