How do self employed borrowers qualify for a mortgage?

Self employed borrowers can absolutely qualify for a mortgage. The right approach depends on how your income is documented, how long you have been in business, your credit profile, available assets, debts and the type of property you are purchasing. Traditional mortgage programs generally evaluate income using tax returns and business documentation, while alternative programs may allow bank statements, 1099 income, assets or other methods of documenting your ability to repay.

What is a bank statement mortgage?

A bank statement mortgage is a type of mortgage designed primarily for self employed borrowers whose tax returns may not fully reflect the cash flow their business generates. Instead of qualifying primarily from tax return income, an approved lender may analyze deposits shown on personal or business bank statements over a specified period. Guidelines vary by lender and program.

A DSCR loan, or Debt Service Coverage Ratio loan, is designed primarily for real estate investors. Instead of qualifying based primarily on the borrower's personal employment income, the lender evaluates the property's rental income compared with its housing expenses. Down payment, credit, reserves, property type and rental income requirements vary by lender.

Can I qualify if my tax returns show less income than my business actually produces?

Possibly. Legitimate business deductions can reduce the taxable income shown on a tax return. Traditional mortgage financing may still work depending on how your income is calculated, and there may be alternative options such as bank statement loans, asset based programs or other Non QM financing.

Can I get a mortgage if another lender already turned me down?

Yes, in some cases. A decline from one lender does not necessarily mean every lender will reach the same conclusion. Guidelines vary by lender and loan program and approval can never be guaranteed, but a second opinion can sometimes find a solution.

What is a Non QM mortgage?

A Non QM mortgage is a loan that does not follow all of the traditional Qualified Mortgage documentation requirements used by many conventional loan programs. Examples may include bank statement loans, DSCR loans, asset based qualification and certain alternative income documentation programs.

How much money do I need for a down payment?

The amount needed for a down payment depends on the loan program, property type, occupancy, credit profile and other factors, and guidelines vary by lender and loan program. Some eligible borrowers may qualify for programs requiring little or no down payment.

Can investment property income help me qualify?

Yes. Depending on the loan program and the property, rental income may be used when qualifying for an investment property mortgage, including DSCR programs that focus on the property's rental income and expenses. Guidelines vary by lender and program.

What documents should I have ready before applying?

The documents needed depend on your income and the type of mortgage you are considering, ranging from pay stubs and W2s for traditionally employed borrowers to tax returns, business documentation and bank statements for self employed borrowers.

Why would I use a mortgage broker instead of one bank?

As a mortgage broker, Diana Bunn can work with multiple lenders and compare programs, guidelines and pricing based on your individual situation, which can be especially valuable for self employed borrowers, investors and clients with complicated income or credit scenarios.

Do you help borrowers in both Florida and Georgia?

Yes. Diana Bunn helps homebuyers, homeowners and real estate investors with mortgage financing in both Florida and Georgia, including conventional, jumbo, government, DSCR, bank statement and other Non QM financing options.

Do you work with buyers in Fernandina Beach, Amelia Island, Yulee and Jacksonville?

Yes. Diana Bunn regularly works with homebuyers, homeowners, real estate agents and investors throughout Fernandina Beach, Amelia Island, Yulee, Nassau County, Jacksonville and the surrounding Northeast Florida communities.

Thinking About Buying a Home Before the End of the Year? Start Planning Now

Diana Bunn

Oct 1

3 min read

October has arrived, and somehow the end of the year suddenly does not feel very far away.

Between Halloween, Thanksgiving, Christmas, travel, school activities, and everything else packed into the final few months of the year, it can be tempting to put major financial decisions on hold until January.

But if buying a home, refinancing, purchasing an investment property, or making a move is anywhere on your radar, October is actually a great time to start preparing.

You do not necessarily need to buy tomorrow. You simply want to know where you stand before you need to make a decision.

Know Your Buying Power Before You Start Shopping

There is a major difference between asking, “How much can I qualify for?” and asking, “What monthly payment am I actually comfortable with?”

Those numbers are not always the same.

A good mortgage conversation should include more than a maximum purchase price. We should also talk about:

Your desired monthly payment
Cash available for closing
Emergency reserves
Future financial plans
How long you expect to own the property

From there, we can look at different purchase prices, down payment options, and loan structures.

Sometimes putting more money down makes sense. Sometimes keeping additional money in savings or investments may be more important.

There is no single answer that works for every buyer.

Credit Does Not Have to Be Perfect to Start Planning

Some buyers avoid talking to a mortgage professional because they are worried about their credit.

That is usually a reason to start the conversation sooner, not later.

I can begin by reviewing the overall picture and helping identify potential issues before you are under contract and working against a closing deadline.

If something needs to be addressed, having several weeks or months to work on it is far better than discovering it after finding a home you love.

Business Owners Should Plan Before Year End

If you are self employed and considering buying a home in the next year, October is also an important time to talk with both your mortgage professional and your tax professional.

Tax planning and mortgage qualification do not always have the same objective.

Business owners understandably want to take legitimate deductions and reduce taxable income. But traditional mortgage underwriting often relies heavily on the income reported on tax returns.

That does not mean you should change your tax strategy simply to qualify for a mortgage. It does mean you should understand how those decisions may affect your borrowing options before your tax return is filed.

There may also be alternative programs available for qualified borrowers, including:

Bank statement loans
Asset depletion programs
DSCR financing for investment properties
Other Non-QM options

Planning ahead gives us more choices.

Investors Should Review Their Financing Too

October is also a good time for real estate investors to review their plans for the coming year.

If you are considering purchasing another rental property, a DSCR loan may allow qualification primarily based on the property's rental income rather than traditional personal income calculations.

This can be particularly helpful for investors who own multiple properties or have complicated tax returns.

Not every DSCR program is the same, though. Down payment requirements, credit guidelines, rental calculations, reserve requirements, and property restrictions can vary significantly between lenders.

That is one of the advantages of working with a mortgage broker who can compare multiple lending options.

Under Contract and Your Financing Is Falling Apart?

Unfortunately, I receive these calls more often than you might think.

A buyer is already under contract and suddenly finds out the lender cannot approve the income, the appraisal created a problem, the loan program changed, or the closing timeline is in jeopardy.

Do not automatically assume the transaction is dead.

I specialize in taking a second look at difficult scenarios and helping determine whether another lender or loan program may solve the problem.

When a closing deadline is approaching, communication and speed matter.

Do Not Wait Until January to Make a January Plan

If buying a home is one of your goals for next year, you do not have to wait until January 1 to begin.

October is a great time to:

Get organized
Understand your credit
Review your income
Evaluate your down payment
Determine what mortgage options may be available

Then, when the right property appears, you are ready to act instead of scrambling to figure everything out.

Let's Build Your Plan

If you are buying in Fernandina Beach, Amelia Island, Yulee, Jacksonville, Northeast Florida, or South Georgia, I would love to help you put together a plan.

And if another lender has already told you no, I am always happy to take a second look.

Who you work with matters.