If you’re a business owner or freelancer, chances are you’re used to figuring things out for yourself – but when it comes to qualifying for a home loan, you don’t have to navigate the process alone.
To qualify for a conventional mortgage, borrowers have to prove their income using their W-2. But if you’re one of the millions of Americans who make their living as a contract worker, a freelancer, working multiple jobs or operating a small business, there are alternate ways to prove your income.
If you’re self-employed and would like guidance from a mortgage expert, the professionals at Newrez are ready to help you find a great loan option to fit your needs.
What Mortgage Options Exist for Self-Employed Borrowers?
Self-employed borrowers can qualify for various loan types depending on how they can prove their income. You might be able to qualify for a more traditional loan type if you can meet certain guidelines.
- Conventional Conforming Loan: This loan only requires a 3% down payment, if you can verify your income with two years of tax returns. These loans can be more difficult to get because they adhere to more stringent guidelines.
- FHA Loans: If you have less-than-perfect credit, you might be able to qualify for this loan and pay as little as 3.5% down. However, you’ll need to have worked for yourself for at least two years, own at least a 25% stake in your business, and have a strong debt-to-income ratio.
However, for many self-employed people, it might make more sense to get a non-qualified mortgage.
What is a Non-Qualified Mortgage (Non-QM)?
A non-qualified mortgage exists outside of the requirements set by the Consumer Financial Protection Bureau. Because a non-QM falls outside of these stricter standards, they can flex to fit the needs of less traditional borrowers.
Non-QM loans include:
- Bank Statement Loans: These loans allow you to qualify when you demonstrate cash flow via 12 to 24 months of bank statements.
- Asset Depletion Loans: A lender will look at your total assets, including your savings account, investments and retirement accounts, and divide that by the number of payments in a loan to figure out what you could afford.
- Debt Service Coverage Ratio (DSCR) Loans: Refinancing an investment property? A DSCR loan will enable you to use the cash flow from that property to qualify for a loan.
The Newrez Solution: Presenting SmartSelf
Newrez offers a series of non-QM loans, called our Smart Series. SmartSelf is our mortgage product tailored specifically to self-employed borrowers. SmartSelf is designed to make it easier for these borrowers to qualify for home financing so they can achieve home ownership.
How Does SmartSelf Work?
SmartSelf allows you the flexibility of qualifying for a loan using alternate means of income verification including:
- Bank statements
- 1099s
- Assets
SmartSelf also enables you to qualify with a higher debt-to-income (DTI) ratio, whereas traditional loans require a DTI of less than 43%.
Can I Get a Jumbo Loan with SmartSelf?
Yes, if you qualify. Because SmartSelf allows you to qualify with a higher DTI than a traditional loan, you may be able to get a jumbo-sized loan even as a first-time home buyer. SmartSelf also varies lower reserve requirements, meaning you don’t need to tie up as much cash in order to qualify for a jumbo loan.
Can I Use SmartSelf to Get Cash?
Yes, if you qualify. SmartSelf can be used to pull cash out of the equity you’ve built up in your home. You can use your home’s equity to:
- Consolidate your debt
- Reinvest in your home by funding renovations or upgrades
- Grow your investment portfolio
- Take a vacation
Find out if SmartSelf Makes Sense for You
At Newrez, we strive to be there for all sorts of borrowers. Self-employed folks deserve a path to homeownership and access to refinance and cash-out options, and we want to make it as easy as possible. Reach out to one of our loan pros today to find out what your options are.
