Business Owners and Mortgages: Finding Lending Solutions for the Self-Employed

I’ve always had an entrepreneurial streak in me. Even now, as a loan officer, I still thrive in an environment where I source my own business, assemble my own team, and spearhead my own deals.?

Naturally, I have great respect for anyone who’s self-employed. These professionals are actively blazing their own paths in life, regardless of the potential risks.?

Unfortunately, lenders don’t always share the same appreciation for that entrepreneurial spirit.?

In their eyes, being self-employed means potential financial uncertainty and volatility. Even if your business is growing quickly, lenders fear it’ll come crashing down—which could then interfere with you keeping up with your mortgage payments on a monthly basis.?

Because of this, lenders tend to have more stringent demands for self-employed professionals compared to W-2 employees.?

Working With the Self-Employed As A Loan Officer

Although the stakes are higher, that certainly doesn’t deter self-employed business owners from getting the mortgages they deserve. These are go-getters, after all, and these folks are used to hearing “no” and finding other solutions around their problems.

That’s why I always work to match their enthusiasm while working together. Many self-employed professionals are hustlers, and they often inject an extra layer of energy into the entire transaction.?

“OK, Stephen,” they say, “what do we need to do next?”

In most cases, we benefit from getting some extra hands involved.?

Business owners are busy people, and while they’re often creative and extremely capable, many of them are big-picture thinkers who occasionally struggle with day-to-day organization. That’s why it’s so valuable to go directly to their accountants and insurance agents early on. We simply sign a Borrower’s Authorization of Third Party form, and then my team and I can directly interact with their accounting and insurance vendors—professionals who are extremely organized and paid to be responsive.?

In some cases, working with business owners is simpler because they come with an innate sense of urgency and a dedicated team—their assistants, accountants, and insurance agents—to back them up. And with that team’s help, we can acquire the credit memo necessary to move forward.?

The Nuance of W-2s Employees and Business Owners

The mortgage industry definitely has its concerns about working with anyone who receives a 1099 around tax season, but it doesn’t feel the same way about full-time employees who receive a W-2 at the end of the year.

With that in mind, we can usually get someone qualified relatively quickly if they recently closed their own business and became a full-time employee for someone else.?

In those cases, we simply need a tidy package that includes a formal offer letter and a recent paystub. That’s generally enough to get us moving in the right direction!

Unfortunately, the same isn’t true when someone moves from a W-2 position to receiving a 1099 at the end of the year. In fact, moving from a full-time employee position to a self-employed position is our first “don’t” of buying a home!?

Feel free to share this graphic with your friends, family members, and clients who are thinking of buying a home! It could help them avoid pitfalls!

If you’re thinking of going into business for yourself, it’s better to wait until you’re completely moved into your new home!?

Getting Self-Employed Business Owners Into New Homes?

At the end of the day, self-employed applicants come with a unique set of challenges, but they’re fun to work with. Their energy levels and positive attitudes keep the transaction rushing forward, regardless of any roadblocks that may appear.

Plus, it never hurts to become a valued part of a true go-getter’s network!?

If you’re a business owner interested in buying a home, contact me! You can reach me at [email protected] or call me at 484-788-1558. Together, we can clear any lending hurdles that pop up, quickly getting you into your next home.

Connect with me through my other channels as well! Follow me on Facebook and Instagram, or check out my website.?