Yes, absolutely! Getting a self-employed home loan is not as difficult as you think, especially with our team on your side. Whether you’re a creator, freelancer, business owner, or rideshare driver, there is nothing to fear when buying a home with Michigan self-employment.
The main difference between W2 and self-employed 1099 income is how you document the income on a mortgage application. The focus of 1099 self-employed home loan documentation is the proof of income stability.
The good news? Self-Employed borrowers can qualify for the same loan programs as traditional borrowers, including Conventional, FHA, USDA, and VA Loans.
Lenders who are accustomed to consistent paystubs and routine employment are wary of 1099s and seasonal income. At Treadstone, however, we love the diversification and creativity of self-employed income. We’ve done countless self-employed home loans, so they don’t bother us!
The documents you’ll need to start a mortgage application as a self-employed buyer include:
Your business license is the “proof of employment” for business owners, which is a requirement for all home loans.
Profit and loss statements, on the other hand, show the financial strength of your income and prove it is active. While a high revenue is great, your take-home pay and general business profit is most important when calculating your qualification.
Mortgage applications for self-employed workers are slightly more involved than traditional loans, so here are our tips for keeping things running smoothly!
Aside from having the coolest mortgage staff on the planet…working with Treadstone on your mortgage in West Michigan gives you a distinct advantage in not only getting your offer accepted, but also in becoming a more successful and enlightened home owner.
Mortgage rates fluctuate daily based on several financial indicators and trends, just like gas prices.
It may be harder to get a mortgage if you’re self-employed. You may need to provide more documentation than someone who has had the same W-2 employment. Some lenders do not work with self-employed individuals because of the increased underwriting requirements, but Treadstone is not one of them! We’re happy to guide you through the self-employed home loan process!
When qualifying for a loan in Michigan as an independent contractor, you’ll need to show proof of active, steady, and reliable income. Generally, we’ll need two full years of income to properly qualify you for a home loan.
Regardless of your income this month, Michigan lenders need to consider the previous two calendar years of your income. To determine your monthly income (an important figure for determining loan eligibility), we take a monthly average of the most recent 24 months of your income (all income divided by 24). If you have been self-employed for less than two full years, we’ll work closely with you to determine eligibility! Don’t sweat it.
Overall, we look for income consistency, business stability, and strong cash flow.
Your business license is the “proof of employment” for business owners, a requirement for all home loans. This lets us know that your income structure is legal and legitimate, and also explains the nature and location of your business. Not a business owner? No problem! We’ll just need to do an employment verification for the source of your 1099 documents, usually by phone call to your client/employer.
Bank statements from your personal and business accounts prove you have the funds available to pay for a down payment and closing costs. These documents also show your active income & expenses.
Like the bank statements, year-to-date profit and loss statements show the financial strength of your income and prove it is active. While high revenue is great, your take-home pay and general business profit is most important in calculating your qualification. Budgets are just as important in business as they are in personal finance.
Tax returns prove your longer-term income! These documents give us an accurate look into the stability of the income sourced from your business. We ask for these documents for all home loans— not just mortgages for self-employed home buyers.
Treadstone asks for at least two years’ worth of accounts detailing income, expenses, and operating costs to fully approve a self-employed mortgage application. All scenarios are different, but it typically means working for two years with steady income. The most important factor in your mortgage is the monthly debt-to-income ratio, which is a simple way of comparing your monthly income to your monthly debt, to ensure you’re able to adequately pay for your new home.
Mortgage lenders in Michigan look for proof of long-lasting, stable cash flow. Being self-employed should not stop you from buying a home! If your income is steady, and you can prove it with two years of documentation, you may be eligible!
Lenders like Treadstone will consider your gross monthly income (after expenses, before taxes), averaged out over the last 24 months! If the last 24 months of income has been steady, your credit profile is healthy, and your debt-to-income ratio is low, you may be eligible for a home loan! That said, our Loan Officers will consider all aspects of your situation and give you a definite answer!
Real Estate Agents may use their commission as a down payment source provided they are licensed and the property is being purchased by them! Treadstone can use your earned real estate commission as an eligible source of funds for down payment and closing costs provided your are a licensed real estate agent and will receive a sales commission from the purchase of the property.
