What You Need to Know About Getting a Self-Employed Mortgage in California

The world was already in the midst of a self-employment and freelancing boom when the COVID-19 pandemic hit. Add the pandemic, and well, the number of people working for themselves has climbed even higher. If you’re a self-employed Californian looking to obtain a mortgage, you may be worried about how your financial situation might affect your ability to qualify. After all, you probably don’t have a set salary—no matter how profitable your business is—that you can show as income. But don’t fret, because a successfully self-employed person has just as much of a chance of getting a loan as anybody with a typical nine-to-five, so let’s go through the things you need to know about getting a self-employed mortgage in California.

We even made a fun video covering this very topic.

Have All Your Tax Returns Ready

Giving a potential lender a look at your tax history is a standard part of obtaining any home loan. And that’s no different when you’re self-employed. The difference is that if your line of work involves you owning—or partially owning—a small business or LLC, you’ll need to give them the tax information on the business, as well as your own personal returns. At a minimum, you need to provide a potential lender with at least two years of both your personal and business tax returns. Note that you will likely need to provide additional documentation, and we can help you with that.

Share Personal and Business Banking Info

Just like you need to share your personal and business tax info, you’ll need to do the same with your banking info. After all, the lender has to know just how you’ve been doing in recent years. And, when you’re your own boss, the same goes for your work. 

You must provide statements covering any business accounts or credit cards tied to your company to a potential lender, along with your personal bank statements. Getting a self-employed mortgage in California requires a thorough vetting of all of your assets (and just like with tax returns, you may need to provide extra documentation).

Business Income Needs to Be Stable

The reason you need to provide so much financial paperwork is the same reason a person with a regular job needs to divulge their income and assets to a potential lender: to demonstrate financial stability. And your business needs to be demonstrably profitable and stable in the same way. From the perspective of mortgage lenders, it’s all about investing in people who are likely to pay off their home loans in full and on schedule and that you have the income to do just that.

Generally speaking, the amount of money you earn from self-employment needs to show stability—or even better, an increase—over at least a few years. And don’t worry—minor fluctuations and declines won’t necessarily prevent you from obtaining a loan. So long as you haven’t had any recent, large declines in income, you’ll be fine.

Pick the Right Lender

Not every lender is going to be easy to work with when you’re self-employed. In some cases, bigger banks are more averse to perceivably riskier loans (like ones to people without salaried positions). But mortgage brokers, like New Way Mortgage, have more options. So even if you can’t get a self-employed mortgage at your bank, a broker like us just might be able to find the right loan for you. Plus, we can help translate your financial situation into the language and paperwork required to get you that home loan.

Important Note: COVID Has Made Lenders Cautious

There’s no denying that the pandemic has made a lot of people and institutions extra cautious. And while having a business or income level that’s remained steady this far into the pandemic bodes well for the future of your business, things are still evolving, and some lenders may still be extra cautious about offering mortgages to the self-employed.

Until the economy is able to fully open, the uncertainty may make it a little more challenging for those who work for themselves to get a loan. But for the successfully self-employed, there will always be smart lenders who understand your situation and remain willing to extend you a home loan.

You Shouldn’t Have Any Trouble Getting a Self-Employed Mortgage in California

Don’t let the extra pieces of paperwork and minutiae get you down. If you’re making your living on your own terms as your own boss, you’ll find plenty of options for mortgages to help you buy your dream home. And at New Way Mortgage, we’re here to make the process efficient and simple.