5 Home Loan Options For Self-Employed Executives

Millions of U.S. citizens are self-employed and searching for the perfect home. In order for many individuals to obtain their dream homes, they need home loans. As a self-employed executive looking to purchase a house, you may be struggling to get accepted for a home loan. Even with careful financial planning, some business owners have a difficult time meeting the requirements. Many believe that they need to give up their dream jobs for their dream homes. Fortunately, this is not the case. Continue reading to discover home loan options for self-employed executives.

FHA Loans

Firstly, consider applying for an FHA loan as a home loan option. Contrary to popular belief, you do not have to be a typical W-2 employee to receive this type of loan. However, you do have to meet a certain list of requirements. This list consists of being self-employed for at least 2 years and maintaining a stable income. It also includes working in a profitable industry. Some lenders also demand borrowers to provide a profit and loss statement. With such a statement, they can gain a better understanding of your financial situation. If you can meet these requirements, you can qualify for one of the best home loan options for self-employed executives.

Non-Conforming Loans

Many self-employed executives also turn to non-conforming loans to purchase homes. Unlike FHA loans, non-conforming loans do not typically have specific requirements. Instead, non-conforming lenders consider each self-employed professional's case individually. Your credit score may have dropped significantly after getting into a bad accident. Medical bills and automotive repairs add up quickly. Rather than dismissing you due to your low credit score number, non-conforming loan lenders ask why your score is so low. If you provide a significant reason, you could still receive a home loan. This is one of the most flexible, understanding home loan options for self-employed individuals.

Limit Your Deductions

Self-employed individuals can also limit their deductions and qualify for a traditional home loan. Thus, traditional loans pose as good home loan options for you. As a self-employed business person, deductions are unavoidable even if you know how to stretch a dollar. However, they can result in issues obtaining a loan. After all, they do impact your taxable income. When you decide that you want to purchase a house, set yourself a cap on itemized deductions. If you are not sure how many itemized deductions is too many, work with an adviser to set a number. The next time you go to write off business expenses, remember that doing so will lower your taxable income. More so, keep your limit in mind. If you can do so successfully, you might be able to qualify for a traditional home loan as a self-employed executive.

Bank Statement Loans

One of the most popular home loan options for self-employed executives are bank statement mortgage loans. By applying for this type of home loan, you avoid dealing with tax return issues. More so, lenders do not require high credit scores or debt-to-income (DTI) ratios. They understand that you have a business to run and do not have time to undergo a lengthy application process. Additionally, they recognize that you need to spend most of your time managing your business. Since lenders offer up to 90% of a home's value, you can purchase your dream home with a bank statement loan.

Full Documentation Loans

Another home loan option to consider is a full documentation loan. To obtain this type of self-employed loan, you need to obtain all of your relevant documentation. Such documentation includes income verification. After all, lenders need proof that you will be able to pay off your mortgage in a timely manner. Full documentation loans are great home loan options for self-employed executives because they offer lower rates. Rates are usually lower because these loans are not as risky for lenders. If you can provide the required documentation to lenders, this home loan option is great for your self-employed needs.

As a self-employed executive, you need to choose from the top home loan options in order to buy your perfect house. Although many self-employed individuals do not even consider FHA loans, you can qualify for one. Lenders who offer non-conforming loans take each applicant's personal situation into account. Limit your deductions to qualify for a traditional home loan. If you desire lower rates and can obtain all of the necessary information, apply for a full documentation loan. In addition to these options, many entrepreneurs turn to bank statement loans for quality financial aid. Choose one of these home loan options for self-employed executives to purchase your dream home.

This article does not necessarily reflect the opinions of the editors or management of EconoTimes.