You can get a mortgage if you are self-employed. However, it does require some extra planning and going outside of conventional financing. Borrowers are required to provide two years of tax returns, which don’t always accurately reflect the actual take-home pay of a self-employed person.
When mortgage underwriters look at tax returns for proof of income, they see the income amount after self-employed business expenses have been deducted. The result can be a lower amount than what the self-employed person actually earns. This may reduce the loan amount that the borrower can qualify for, or may result in a rejection.
If you are self-employed, allow for extra time to prepare your paperwork before applying for a mortgage or refinance. One suggestion is to write off fewer business expenses in the two years leading up to the loan application, which will boost your take-home pay. Also, make sure your business finances do not mix with your personal finances. Lenders may ignore seasonal shifts in income by averaging your wages over a 24-month period, however, the lender does not like to see an income decrease from one year to the next.