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Posted on 12/07/2020 in Owner-Occupied Hard Money Loans

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

If you’re self-employed, you might have heard that it’s more difficult to get a mortgage. This unfortunately is true if you’re going the conventional route. Self-employed borrowers aren’t ideal to traditional lenders, because they lack the tax documentation and other standard proof of employment needed to show their income.

For newer business owners especially, the advice to make sure your credit score is high enough and that you can offer a large enough down payment isn’t always reasonable or feasible.

One option for getting a mortgage when self-employed is a private money loan. Read on to learn more about these loans and how they differ from a traditional mortgage.

Why self-employed mortgage options are difficult for borrowers

Banks used to offer options for self-employed borrowers, such as non-qualified mortgages that assessed borrowers through Bank Statement Programs or Asset-Based Lending. These options are no longer available, and trying to get a traditional bank loan if you’re self-employed requires significant documentation for approval. 

It’s unlikely a self-employed borrower would be able to acquire a bank loan in less than 60 days due to the heavy documentation and paperwork required on all ends. If you’re a new business owner, you may lack enough income history to prove you can make monthly mortgage payments. You may jump through hoops to gather all of the documentation that you can, and still be denied a loan in the end. 

The money and efforts it took to get your business up and running also may have left you with a less-than-ideal credit score. Since this is an important factor to lenders, you may be outright denied. It can be even more frustrating to busy business owners because you may lack the time and resources to spend seeking the required documentation in the first place.

What options does this leave the self-employed, if you now have the funds to make monthly mortgage payments but don’t meet the rules for a traditional loan?

How private money loans work for business owners

A private money lender can simplify the process for getting a mortgage when self-employed. They look at each individual and decide case by case if it makes sense for them to fund the transaction.

Conventional loans require you to be a business owner for a certain length of time before consideration. Even with loosening guidelines, the government-sponsored loan company Fannie Mae still requires at least 12 months of self-employment history for qualification— and that’s only if you have previous experience in the field and your income is at least as much as what you had earned in the field prior to becoming self-employed. This is sometimes referred to as seasoning.

On the other hand, if a private money loan makes sense to the lender, they’ll do it, regardless of how long you have been a business owner. Private money lenders don’t require seasoning — it’s more about the value of the deal than any other factor.

Private money loans are quick and efficient

One of the biggest benefits of a private money loan is the speed. Approval is fast and you can get funding within days instead of months. If you’re trying to get into a new business location quickly so that you can grow the business, this can be an ideal solution for growth.

As a business owner, you don’t have the time to be attending lending appointments or taking hours to collect documentation such as proof of income, especially since it’s hard to prove if your business is newer. While you’re away from your business, who can cover for you? Not everyone has reliable staff in the early stages of self-employment.

Private money loans can be a more sensible option for self-employed borrowers seeking to keep a growing business running smoothly while also trying to move ahead for success. Closing on the loan can happen in days instead of months, which makes a huge difference for the right real estate investment.

How to get a private money loan when self-employed

A private money lender still needs some documentation to provide you with a loan, but it’s less labor-intensive and more straightforward. They will need proof of your identity, a deed of trust, a note, and a written plan detailing how you will use the loan and the profits you are expecting.

It’s possible that you’ll be asked about your credit score, but this won’t prevent you from getting the loan — it may just affect your interest rate. Expect to provide a down payment as well.

Where to get your private money loan

If you feel like you’ve exhausted all options for getting a traditional mortgage when self-employed, or if you’re just starting the journey now and want to keep it simple and efficient, Marquee Funding Group is ready to help.

Our team of savvy loan officers and underwriters have the experience and education to quickly get you through the loan process. 

Our in-house services include:

  • Underwriting, processing, and servicing all in one place
  • Same-day approvals
  • Closing in as quickly as seven days
  • Loan amounts from $50,000 to $20 million
  • Single family, multi-family, commercial, industrial, and land loans
  • Construction and bridge loans
  • Second and third mortgages
  • Loan-to-Value up to 70%
  • Purchase money, rate and term refinance, and cash-out refinance

Call or email us today for straightforward solutions to your loan needs, even if your situation seems complex or unusual. We make decisions based on the merits of each deal and the benefits to you. 

If you are ready to get started, fill out this form to submit your loan request, and we will contact you soon. We look forward to working with you.

Photo by Medienstürmer on Unsplash