Is it harder to get a mortgage if you are self-employed?

If you are self-employed, qualifying for a mortgage loan can be difficult.

What does it mean to be self-employed?

Oftentimes, there are misunderstandings as to what is considered self-employment income. You do not have to own your own business in order to be considered a self-employed borrower.

You are considered a self-employed borrower if you receive a 1099 at the end of the year. As such, your income is calculated differently than a W2 employee because

  • you are responsible for paying your own taxes, and
  • you typically have business expenses that you can write-off.

If more than 25% of your income is paid as commission, you also fall into a self-employment category and you are entitled to business expense write-offs.

As a self-employed borrower, a financial institution will need to review your past two years’ tax returns to calculate your income. If you just started a business, then your income has changed to 1099 or commission. As a result, in most cases your income will not qualify when calculating household income for a mortgage loan.

Michelle Castle provides mortgage loans to all of North Texas and Southern Oklahoma. Call Michelle Castle at (903) 892-1998 if you are looking for a home loan in North Texas and Southern Oklahoma.

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