Self-employed mortgage lenders are lenders with programs for business owners whose declared income understates what the business actually earns. Prime lenders qualify you on the income on your tax returns; alternative lenders will also consider stated income or business bank statements, at a higher cost.
The lenders listed here describe the self-employed programs they offer. Which kind of lender fits depends on how your income shows up on paper, not on how much the business really makes.
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Banks, credit unions and monoline lenders will lend to self-employed borrowers on declared income, usually averaged over the last two years, with some non-cash deductions added back. If your declared income supports the mortgage, this is the cheapest route and there is no premium for being self-employed.
Some prime lenders also have limited stated-income programs for established businesses, particularly where the down payment is large. It is worth checking before assuming the file has to go elsewhere.
Alternative lenders run the programs built for this problem. A stated income mortgage lets you declare an income reasonable for your industry and time in business, supported by evidence the business is real. A bank statement program infers income from business deposits over a recent period.
Both cost more than prime, a higher rate, a lender fee and a larger down payment, and both still require income that is plausible for the business. No income verification at all is a private lending product, priced on equity alone.
Lenders differ on how long you need to have been self-employed, which business structures they accept, and how they treat income paid through a corporation. Those rules decide approval, and they are not published in a way that is easy to compare.
A broker who places self-employed files regularly knows them. If a purchase is a year or two away, talk to your accountant too: declaring more income for two years can move you from an alternative lender to a prime one.
Prime lenders: banks, credit unions and monolines, lend to self-employed borrowers on declared income. Alternative lenders offer stated income and bank statement programs where declared income is too low. Private lenders will lend on equity alone.
Private lenders will lend mainly on equity with little income documentation, at private-lending cost. Regulated lenders, including alternative lenders, need some evidence that the income is reasonable, even on stated income programs.
An alternative lender that assesses income from business bank deposits over a recent period rather than from tax returns. It suits businesses with steady cash flow and heavily optimised tax filings. Keeping business and personal accounts separate helps a great deal.
Not at a prime lender on declared income. The higher rate applies only when the file needs an alternative lender’s stated income or bank statement program.
