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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.
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.
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.
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.
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.
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.
As a self-employed borrower, you may qualify for various types of mortgages, depending on your specific situation. Options include the following:
| Bank Statement Loans | Bank statement loans use bank statement data instead of traditional income documentation to qualify. |
| 1099-Only Loans | 1099-only loans are designed for independent contractors who receive income via 1099 forms. |
| Profit & Loss (P&L) Loans | Profit & Loss (P&L) loans use business financial statements to assess income. |
| Non-QM Investor Loans | Non-QM investor loans are designed for investors who do not meet traditional qualifying criteria, often due to non-traditional income sources or investment property types, providing flexible financing options outside standard conforming loan guidelines. |
| Asset Depletion Loans | Asset depletion loans allow borrowers to qualify based on assets rather than traditional income documents. Instead of using a salary to calculate the debt-to-income ratio, lenders “deplete” the borrower’s assets over a set period to estimate a qualifying income. |
| Asset Utilization Loans | Asset utilization loans enable borrowers to qualify for a mortgage by leveraging their liquid assets instead of solely depending on traditional employment income, with those assets acting as collateral for the loan. |
| DSCR loan (Debt Service Coverage Ratio loan) | A DSCR loan is primarily used for investment properties, where the borrower’s ability to repay is evaluated based on the property’s income relative to its debt payments. |
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.
Sammamish Mortgage is a local, family-owned company based in Bellevue, Washington. If you are looking for mortgage financing in Oregon, we can help you get pre-approved. Sammamish Mortgage offers mortgage programs in Colorado, Idaho, Oregon, and Washington since 1992. Please contact us if you have mortgage-related questions, or visit our website to get an instant rate quote.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.