For freelancers to small business owners, the homeownership path may have presented a few hurdles in the past. As a Community Development Financial Institution, Quontic is here to change that. If you’re wondering how to get a home loan when self-employed, we have the answers. As long as you have a good credit score, flush cash flow, and can prove your repayment history through your credit report, we can help you achieve the dream of homeownership for the very first time.
A changing lending landscape can make qualifying for a mortgage even more difficult for the family business owner, a serial entrepreneur with their own business, or an independent contractor. For instance, shifting economic conditions triggered by the coronavirus pandemic have led many lenders to tighten borrowing guidelines.
Why is it harder for self-employed to secure a home loan compared to w2 employees?
It can be harder to prove how much income you have without a steady paycheck or income tax documents like a W-2. That’s why traditional lenders impose more stringent rules for self-employed borrowers. Most lenders want to ensure that your business income has stayed consistent for more than two years. The bottom line is, just because it may be more difficult for other lenders to qualify business owners, doesn’t mean it’s impossible. Quontic is the bank for the underbanked so we’re taking the difficulty out of the home financing process to level the playing field for those who need it.
What income sources are acceptable for self-employed borrowers?
The term of self-employed borrower is not exclusive to those who own multiple businesses. Potential homeowners with difficult to document income can include:
- People who’ve been self-employed for more than one year but less than two years
- Small business owners or freelancers with uneven revenue
- Gig workers or independent contractors with variable income
- Someone who’s transitioning from a salaried job to run a family business (provided the business has been in operation for at least two years)
- People whose business has had extraordinary planned or unplanned expenses which temporarily reduced their net income
As long as you can provide proof that your income is ongoing, stable, and sufficient along with a good credit score to match, Quontic can help you make homeownership happen.
What do mortgage lenders look for to qualify?
When it comes to borrower qualifications, mortgage lenders consider a lot. From the self-employed lens, the traditional requirements of conventional mortgages and FHA loans do not always align with the personal finance documents that come along with being a business owner. In order to start a loan application, traditional lenders typically require:
- Two years of federal income tax returns (personal and business)
- Up to date business bank statements within 10 days of closing confirming revenues are consistent with qualifying income and gross receipts appearing on the tax returns.
- A year-to-date profit and loss statement that shows revenues, business expenses and net income
- A letter from a CPA to confirm your business has existed for at least two years
- Your credit score and credit history, including your three credit reports from Equifax, Experian and TransUnion
A freelancer or business owner who had a down year followed by an outstanding one, or vice versa, could see their mortgage options shrink as their documented two-year average income might not be reflective of their true earning power, thus making mortgage approval even more challenging. Debt like student loans, credit cards, or car notes can affect your debt to income ratio and hinder your ability to qualify for a mortgage.
That is why Quontic takes a holistic look at self-employment to give potential homeowners the best financing plan possible. Fortunately, Quontic offers unique lending programs that don’t require most or any of the barriers that other lenders may demand such as debt to income ratio (DTI) and tax documents. As long as you have a strong track record of repaying debts and making monthly payments on time, you have the potential to become a homeowner.
What documentation do you need to get a mortgage?
Traditional documentation requirements can leave self-employed home buyers in the dark. Typically, borrowers have to submit to the agony of providing lengthy documentation to prove their financial profile. This includes producing business tax returns, pay stubs, W-2s, or a stack of bank statements to show a consistency of steady income to Fannie Mae and Freddie Mac.
All of this adds up to a perfect storm of challenges for self-employed clients. At Quontic, our mission is to change that. Quontic offers innovative mortgage products designed to help them achieve their homeownership dreams. With a strong credit history, cash reserves, and the financial fitness to make mortgage payments on time, we’re offering breakthroughs in borrower qualification.
What type of loan solutions are available for self-employed borrowers and entrepreneurs?
While most lenders shy away from self-employment as a funding source, Quontic embraces it. That’s what sets us apart from other lenders. Quontic’s mortgage loans allow self-employed borrowers to use a 12-month Self-Prepared Profit & Loss Statement as proof of income; meaning no personal tax returns or W-2s are required for loan approval. In addition, no personal tax returns or W-2s are required for loan approval, and up to 100% of down payment funds, closing costs, and reserves can be gifted. Our programs are available to owner-occupants or investors alike. As long as your self-employment income proves you can keep up with your monthly payments, we can help bridge the gap to homeownership.
In addition to our Community Development loans offer so many amazing benefits like:
- Second homes are allowed
- Minimum FICO credit score of 660
- 15 or 30 year fixed mortgage options
- Refinance options
- First-time homebuyers are eligible
- Loan amounts up to $3,000,000
How do I get started?
If you’re self-employed and looking to become a homeowner in the near future, now is the perfect time to get started. There’s no better time than now to start a loan application. Quontic is here to help you make homeownership a reality. As a Community Development Financial Institution, we cater to the underbanked. Our loan programs are the perfect option for self-Employed people who have good credit, strong liquidity, and the means to pay, but who may have inconsistent documented earnings, non-recurring expenses, or other circumstances which cause an inability to document income traditionally. We won’t let documentation be your downfall. Ready to start your mortgage application? Speak to a mortgage specialist today.