Self-Employed? It's Harder to Get A Mortgage

USA Today ran a story on how it's more difficult for self-employed people to get a home loan today. Many lenders have closed their doors entirely. And many lenders that still offer such loans have tightened their standards, making it harder for self-employed borrowers to qualify.

Here’s what self-employed borrowers need to qualify for a mortgage in this new environment:

More documentation. Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements and proof that they’ve been in business for at least two years. A letter from their accountant probably won’t be good enough.

Fewer tax deductions. Self-employed workers who plan to buy a home in the next year or two might want to forgo some deductions. Show as much income as you can.

Larger downpayments. An old-fashioned 20 percent down is very persuasive.

Excellent credit. A credit score of 720 or higher will give a self-employed borrower some choices.

Patience. Even for well-off business owners, qualifying for a mortgage is not that smooth, easy no-brainer like it used to be. If you want it to be quick, you’re paying a higher price.

Source: USA Today, Sandra Block (10/02/2007