Ready to buy? How an independent contractor mortgage could work for you
You’re your own boss. The sky’s the limit for earning potential. You can attend your kids’ sporting events and rehearsals with a flexible schedule, and it’s an opportunity to showcase your expertise and skills. Regardless of which industry you’re in, being an independent contractor comes with the perk of tax advantages that can help you keep more of your earnings without showing it as income.
While lowering your taxable income is a bonus, there’s a downside. With less verifiable income, it’s much tougher to get your mortgage application approved to buy a home. According to the numbers, it doesn’t look like you can afford the mortgage payment. Like many self-employed borrowers, you could be pigeonholed into renting a home rather than buying one.
Lenders like us at MBANC can be the saving grace you need to qualify for a mortgage. Here are tips when applying for a mortgage as an independent contractor.
Can you prove your income?
For traditional mortgage lenders, it’s much less about the loan amount than it is about your monthly income or the bottom line on your tax returns. Since you don’t have W-2s to show regular income to service your home loan, most lenders look at your tax return as proof of income. It’s no surprise that the benefits of holding a business license, namely the reduction in taxable income, make it look like you can’t service the payments.
But there are options. With MBANC, a deep dive into your bank statements can often be enough supporting information to verify consistent and sufficient cash flow to qualify as an independent contractor for a mortgage.
What does your bank account say?
Maybe you don’t have the history in business to qualify on your tax returns. Don’t give up hope yet. A bank statement loan is a potential opportunity to purchase a home. It’s an option that FHA loans can’t provide, and it can work. If you have money in the bank and consistent throughput, that can be enough for an approval.
Bank statement jumbo loans require a down payment, and you must have a decent credit history to qualify. But it’s a way you can get approved for a mortgage without traditional income verification.
What’s your credit score like?
Business ebbs and flows. If yours has ebbed more than flowed in the past, your credit score might’ve taken a hit, making qualifying with a competitive interest rate more difficult. However, MBANC bank statement loans allow consider applications if you have a minimum credit score of 660. So even if you’ve had late payments on credit cards or car loans in the past, you may still be able to get approved and funded.
Do you currently hold any real estate?
If you currently own a home, accessing the equity for renovations or to invest in your business may be next to impossible unless you can prove serviceability. However, MBANC’s bank statement jumbo loans allow for 70% cash-out refinancing so you can make the most of your equity however you want. With traditional mortgages, that may not be possible.
If it’s time to buy a home instead of rent, or you’re ready to upgrade from a starter home to a dream home, let us help. At MBANC, we specialize in mortgages for professionals like independent contractors, consultants, freelancers, and more. Contact us to find out more about your mortgage options.