Applying for a mortgage can seem daunting – especially if you're self-employed or are working in the gig-economy. However, it may not be as complicated as you think.
Generally, lenders will evaluate the four Cs when determining a borrower's eligibility for a mortgage. If your self-employed, you'll still be evaluated on the four Cs, but may be asked to provide some different or additional documentation to determine how much you may be qualified to borrow.
If you're self-employed, you may be required to submit the following documents when applying for a mortgage:
The biggest difference in the four Cs for self-employed borrowers is proof if income – which falls under capacity. For salaried borrowers, lenders will typically require at least one month of pay stubs and one or two years of W-2s to determine the applicant's income. However, if you're self-employed, you likely don't have W-2s. Instead, you will need to submit different documentation such as one-to-two years of personal and business tax returns to verify your income.
Additionally, if you're self-employed or you own your own business, you may have to provide additional documentation to show your assets, for example — a business license or a statement from your accountant.
Throughout the homebuying journey it's important that you work with a trusted team of advisors to guide you through the process. If you're a self-employed borrower and your lender is an approved Freddie Mac Seller/Servicer that submits loans through Loan Product Advisor®, they can register for our Loan Product Advisor asset and income modeler (AIM) for self-employed capability. AIM for self-employed helps simplify your income calculation using tax return data – and helps get you and your lender to closing faster.
Learn more about the homebuying process by visiting MyHome® by Freddie Mac.