Buying a house doesn’t have to be difficult if you are recently self-employed!
Remember when lenders offered “stated income loans” for self-employed borrowers? Before the 2008 financial crisis, many lenders offered self-employed borrowers the ability to secure a loan with little or no proof of income. In the wake of the financial crisis, stated income loans have disappeared from the market and have left in their place loans with much higher lending standards that make it more difficult for self-employed borrowers to purchase a home. The financial regulators determined that lenders were making it too easy to get a mortgage and they now require each lender to make sure that the buyer has the reasonable ability to repay their loans. Under these rules all borrowers must prove their income, whether they are employed or self-employed, and properly show how they have received that income.
For the over 9 million self-employed people in the United States reported by the US Department of Labor, there are many lending solutions available with two years of tax returns, including:
- FHA Lender: The Department of Housing and Urban Development (HUD) offers mortgages to self-employed Americans if the potential buyer can meet a few standards, including the buyer be self-employed for at least two years. If the buyer has only been self-employed between one and two years, the HUD may consider the income if the homebuyer was previously employed in the same line of work, as is now self-employed, for at least two years.
- VA Lenders: For active or retired military members, as well as their spouses in some cases, the VA offers self-employment mortgage options for those able to show stable returns for two years. For those with less than two years of records, the VA generally does not consider the homebuyer unless they have “had previous related employment and/or extensive specialized training.”
- Fannie Mae: A large buyer of conforming mortgages, Fannie Mae offers options to self-employed homebuyers able to show two years of earnings history, as well as proof that these cash flows will continue.
- Freddie Mac: Freddie Mac, another large buyer of mortgages, requires that those with less than two years of self-employment history must prove they have at least two years of experience in the field.
However, for new small-business owners with only one year of tax returns, finding a mortgage to finance the purchase of a new home is difficult. While the above lender options may allow homebuyers with one year of tax returns to lock in a mortgage, these offers are extremely rare.
If you are unable to qualify for one of the above programs, but still want to buy a home with only one year of tax returns, Hurst Lending’s Self-Employed Bridge Loan program was created to help. As a mid-size, family owned lender, we believe in helping to ensure entrepreneurs and contractors are not penalized for lack of tax history when they are able to, and want to, move now. The Self-Employed Bridge Loan program offers potential homebuyers with only one year of tax returns the ability to secure a home with a bridge loan, which acts as a tool to fill the gap of time where a homebuyer does not qualify for conventional lending solutions. As soon as you have two years’ worth of tax returns, the program helps you refinance the bridge loan into a normal low-rate, 30-year or 15-year fixed rate, conventional loan – allowing you to buy with less than one year of tax returns and forgo being penalized for self-employment.
To learn more about the Self-Employed Bridge Loan program, or get a free quote, click the get started button below. If you already have two years of tax returns we can still help as we offer a full range of the loan options mentioned in this article.