Best Mortgage Company for the Self-Employed in 2023

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Any time you apply for home financing, you need to be prepared to provide documentation of your income and finances to prove you are able to make your payments. But most home financing companies require self-employed applicants to provide even more documentation than what’s required of applicants with W-2 employment.  

While providing that extra documentation is time-consuming and may leave you feeling nervous, home financing companies require this information for a reason. The companies need to confirm you not only have income but also have a stable self-employment arrangement that provides reliable income upon which you can depend for making your mortgage payments. By asking for this information, home financing companies are ensuring they are making a wise investment by funding your mortgage. 

How to Get a Mortgage When You’re Self-Employed 

Being self-employed can make it more difficult to get home financing. Some companies avoid working with the self-employed because of additional underwriting requirements. But it is possible to get a mortgage when you’re self-employed, even if you have to do a little more work to get approved.  

There are several tips on how to make your application more appealing to a mortgage company, increasing your chances of getting approved: 

Tip #1. Look into Your Debt-to-Income Ratio  

Home financing companies want to see that you have a low debt-to-income ratio. This demonstrates you will have enough income left over each month to make your mortgage payments. Your debt-to-income ratio reflects the amount of your gross monthly income that goes to your monthly debts, like credit card and car payments. If the ratio is too high, a home financier may question whether you will be able to pay your mortgage. 

Most financiers won’t approve a mortgage for a potential homebuyer with a debt-to-income ratio of more than 43%, meaning that your monthly debts cannot equal more than 43% of your income. Keep in mind that 43% is the maximum, though; many home financiers prefer to see a ratio lower than 36%. If your debt-to-income ratio is too high, work on paying off your debts and/or increasing your gross income. 

Tip #2. Check Your Credit 

Your credit score helps mortgage companies gauge how likely you are to make your mortgage payments. Credit score minimums vary depending on the type of mortgage for which you are applying. However, for a fixed-rate conventional mortgage, you should have a credit score of at least 620. Since financiers are more cautious about approving mortgages for the self-employed, your credit score plays an even more important role in helping you to get approved.  

>> Related Read: Could Mortgage Pre-Approval Hurt Your Credit Score? 

Tip #3. Offer a Large Down Payment 

Offering a large down payment reduces the risk for any potential home financier. It also demonstrates that you can manage your finances responsibly. While putting a 20% down payment is common for conventional mortgages, if you are self-employed, try to save up even more to increase your chances of being approved. Putting down more money results in lower mortgage payments and allows you to pay less over the life of your mortgage. In other words, a large down payment can “pay off” in multiple ways.  

Tip #4. Have a Strong Self-Employment History 

Establish a self-employment history of at least two years to demonstrate that your self-employment income is reliable and stable. This is particularly important because self-employment can result in fluctuating income. Your ability to demonstrate steady income over an extended period of time can assure a financier that you will be able to make your monthly home financing payments.  

Tip #5. Separate Your Business and Personal Assets 

Keeping your business and personal assets separate is good business practice and can help expedite the mortgage approval process. When you maintain properly managed books for your business, a financier is less likely to ask for additional documentation about your business finances. Well-managed books also make your business look more professional and positively reflect its stability, making you appear to be a lower-risk applicant to a home financing provider.  

Tip #6. Be Patient and Willing to Provide More Documentation 

Because financiers typically require more documentation for the self-employed, your application process will likely take longer than it would if you were a full-time W2 employee.  

Be patient and stay flexible throughout the process. If the financier requests additional documentation, try to provide it quickly, which can help keep the process moving. 

How to Find the Best Mortgage When Self-Employed 

Different financing companies offer different types of mortgages — some are more self-employed friendly than others. Keep in mind that you will be paying your mortgage for up to 30 years, so take time to find the right fit by comparing multiple home financing providers.  

Tip #1. Compare Rates 

As you compare home financiers, review the potential rates you would receive from each provider. You will need to consider whether a fixed or variable rate mortgage is right and how much risk you are comfortable taking on. A fixed-rate mortgage, where the rate stays the same for the life of the mortgage, is often ideal if you plan to stay in the home for many years. Alternatively, you will incur more risk but might save money with a variable-rate mortgage, where the rate can change throughout the duration of the term.  

Tip #2. Consider the Down Payment 

Try to save up as much money as possible for a down payment. Putting down a larger initial payment can make you a lower-risk applicant in the eyes of many mortgage companies, which is particularly important when you are a self-employed homebuyer. It also reduces your mortgage amount, so you will have lower monthly payments and pay less overall on your home.  

With a larger down payment, you may not need to purchase private mortgage insurance, which can save you additional money and help keep your monthly payments down.  

Tip #3. Explore Term Lengths 

Your term length will affect your monthly payments and the total amount you pay. Shorter terms will have higher monthly payments, but you will own your home sooner and pay less overall.  

A 30-year mortgage is more standard than shorter 15-year options. Homeowners can always refinance their mortgage for a shorter-term option at any time. 

Tip #4. Account for Fees and Closing Costs 

Your home financing company should provide you with an estimate of your closing costs, which includes expenses like the down payment, appraisal fees, taxes, and homeowner’s insurance. If you are putting less than 20% down on your home and are taking out a conventional mortgage, then you will need to budget for private mortgage insurance, which will be added to your monthly mortgage payments.  

You may be able to negotiate an arrangement with the home seller where they pay the closing costs, but you will need to be prepared to pay those closing costs if you can’t reach such an arrangement.  

Tip #5. Trust in Experience 

As a self-employed individual, you may have a harder time getting approved for a mortgage than applicants who are W2 employees. To maximize your odds of approval, you can partner with an experienced mortgage broker or financier. These professionals can answer your questions and guide you in completing your application to ensure that you are providing all of the essential information that a home financing provider requires.  

Navigating the mortgage application process can be confusing, but having a professional on your side can boost your confidence and increase your chances of getting approved.  

The Best Home Financing Company for the Self-Employed Is Guidance Residential 

Since 2002, Guidance Residential has been offering home financing for self-employed homebuyers. Guidance Residential takes a different approach to home finance. When you apply for home financing, you and Guidance Residential will enter into the agreement as co-owners. You will increase your share in the home over time through your monthly payments.  

This Declining Balance Co-Ownership Program charges no interest (riba-free), and late payment fees are capped. There are also no prepayment penalties, so you can potentially buy your share in the home sooner and own your home outright. As a result, Guidance Residential may be the perfect option for the self-employed.  

Get pre-qualified for home financing online in fewer than 10 minutes with Guidance Residential. 

Originally published April 2019, updated April 2023.