What is required to buy a home in Oregon when self-employed? How do I qualify for a mortgage loan as a self-employed borrower?
These are common questions among home buyers in Oregon who also happen to be self-employed. So we would like to address them here today.
Buying a Home in Oregon When Self-Employed
According to a report published last year by the Bureau of Labor Statistics, roughly 10% of the U.S. population are self-employed workers. Oregon has a population of about 4 million people. Using the national average for self-employment, that means there could be around 400,000 people in Oregon who are self-employed. And quite a few of them are potential home buyers.
Some of these potential buyers feel that they are unable to qualify for mortgage financing in Oregon, simply because they are self-employed. But in most cases, self-employment by itself is not really an obstacle at all.
The truth is that a self-employed borrower with good credit and sufficient income could qualify for a mortgage loan, just as easily as a traditionally employed borrower. Self-employed home buyers in Oregon might encounter some additional paperwork requirements, when applying for a loan. But that shouldn’t deter you from pursuing your dream of homeownership.
Here are some things you should know:
P&L statements. Profit-and-loss statements are typically required for self-employed borrowers who are trying to qualify for a mortgage loan in Oregon. These, along with other documents, are used for income-verification purposes. With a traditionally employed borrower, annual income can often be verified solely through tax returns. But that isn’t always possible for self-employed borrowers, who might have variable and nontraditional income sources. For this reason, a P&L is typically required.
Greater flexibility. During 2017, new mortgage programs came onto the market that could make it easier for some self-employed borrowers to qualify for financing. For example, there are new mortgage products available that use bank statements instead of tax returns as a means of verifying the borrower’s income. These and other financing options could be particularly helpful for self-employed home buyers in Oregon. (Please contact us if you want to explore your options.)
Income analysis. Fluctuating income can be an issue for some self-employed borrowers, though it’s not necessarily a deal-breaker. It’s just something to be aware of, because additional scrutiny might be applied. Most of the mortgage loan programs available today average the gross income for the past two years. That’s if the borrower’s income has increased. In cases where the income has declined, the mortgage company might use the lowest income from the most recent year.
Payment capacity: Your ability to repay the mortgage debt is what matters most. This is true for traditionally and self-employed borrowers alike. When a person applies for a home loan in Oregon, the bank or mortgage company will analyze their income and existing debts to ensure they have the capacity to repay the loan.
The bottom line: If your bank statements, tax records and/or cash-flow analysis show that you have the financial ability to repay the loan, you could qualify for mortgage financing with no problem at all.