There are a ton of rewards that self-employed individuals and small business owners benefit from when deciding to be their own boss. This is undoubtedly why as many as 16 million people in the U.S. identify as self-employed. However, there are challenges that self-employed individuals face as well. One such drawback can be difficulty in obtaining a mortgage loan. Fortunately, some lenders specifically serve this market of borrowers. But you’ll need to work with a reputable mortgage broker to find these specialty lenders. Read on for everything to know about portfolio lending for self-employed borrowers.
Why Are Loans Difficult to Obtain for Self-Employed Borrowers?
Small business owners and self-employed individuals are more likely to have inconsistent income when compared to a W2 employee. Likewise, self-employed individuals often have significant write-offs that lower their taxable income. With a lower taxable income, the amount you can borrow may be reduced. In other cases, you may be newly self-employed, and a lender will require at least two years of income. Fortunately, portfolio lending is a viable solution for many self-employed individuals.
Who Qualifies as Self-Employed?
Self-employment doesn’t necessarily mean you own your own business. Many workers may be considered self-employed if they contract for others. You may be considered self-employed if you:
- Own at least 25% of a business
- Receive 1099s instead of W2s
- Work for a variety of companies or individuals
- Earn 25% or more of your income from self-employment (gigs, side jobs, etc.)
- Earn most of your income from interest or dividends
What Is Portfolio Lending?
Portfolio loans are made by private investors, and they aren’t always made directly to the individual. However, established and reputable mortgage brokers will have relationships with these lenders so they can best serve their self-employed customers.
Portfolio loans don’t have the same clearly defined requirements as conventional or conforming loans. For example, some portfolio lenders don’t require tax returns. They may instead require bank statements.
Other portfolio loans may offer benefits including:
- Loans for those who have declared bankruptcy in less than 4yrs
- DSCR (Debt Service Coverage Ratio) for investment properties, no tax returns required
- Loans requiring only bank statements for deposit/income analysis
- Loans for individuals who do not have a social security number yet
- Stated income loans
- Loans for foreclosed properties or short sale properties
- Loans for individuals with past-due tax problems
Getting Loans for Self-Employed Individuals in Oregon
Being self-employed does not automatically disqualify you from obtaining a loan from FHA or another institutional lender. You aren’t automatically disqualified from USDA or VA loans either. Portfolio lending is simply another resource if stringent requirements prevent you from being qualified for one of these loans.
Portfolio Loans in Oregon
When you work with a reputable mortgage broker in Oregon, you’ll have access to a variety of loan products available, including portfolio loans. At Strategic Mortgage Solutions in Eugene, we work tirelessly to find the best loan for your situation, whether you own your own business, contract for others, or hold a W2 job. Contact our team of mortgage advisors today by calling 541-275-1148 or sending us a message.
