Mortgages For The Self-Employed

If you are self-employed and want to get a mortgage you generally have to have been self-employed for a minimum of 2 years.  It isn’t always the case but it is a good rule of thumb. 

I have had people who have been self-employed for less than 2 years, have been in the same line of work for numerous years, show that they have made a lot of money on their tax returns, but can’t understand why it’s so hard to get a loan. 

Well, here is your answer.  “According to a study done by the Small Business Administration, two-thirds of all new small business survive the first two years but only 44% will still be operating by year four.”  Also, you could have gotten lucky in the first year or so with a big sale, etc.  It is very hard to tell what is recurring and what isn’t.  How does the bank know you can sustain that income?  They don’t.

Try to keep that in mind when y0u are being asked for a lot of documentation.  It’s not that the bank wants to torture you with conditions but they want to make sure you will be able to make your payment for years down the road. 

http://www.businessweek.com/smallbiz/content/oct2009/sb20091030_273887.htm