Being self employed has many benefits. When you are self-employed, you can write off all of your deductions on your taxes. You have the potential to make more income than someone who is employed by someone else. You have the freedom to be your own boss. One of the few times when being self employed has some drawbacks is when you go to get financing for a home or a major purchase. But, here are some things to know that may help you contruct the mortgage loan process run smoothly when you are self employed.

When verifying income - In general, lenders want to see at least 2 months of self employment history, sometimes they want to see 3 months. They will want to see this history verified in tax returns, usually. Sometimes the lenders will figure your income as being the average income you claimed on your income taxes as profit, not your gross business income. Sometimes the lender will figure your income as the lowest of the two many years and sometimes as the highest of the two many years. Talk to your mortgage broker or lender and find out which way they verify. Sometimes lenders will figure a portion of your write-offs or deductions back into your income. There are ideas of other ways that a lender could be able to verify your income and if you are self employed it will help you to be able to show a more of your income.

A. Use bank statements as proof of income Find a lender who will accept 1-2 months of bank statements as proof of income. It is becoming more common nowadays for lenders to verify your income this way. This way usually works better in proving income than going off of your taxation returns, because you may usually prove a lot more cash flow than taxation returns will show. On your taxation returns you usually subtract each and every business expense before you claim any profit. When using bank statements, you are still proving income, this does not put as much emphasis on your credit score or down payment as the stated income or no doc loan will.

B. Do a stated income or no doc loan These types of loans are done all of the time, where you positive need no proof of income, you only state on a form what your income is, and you do not absolutely need to verify it. This may help if you are self employed and want to state your income as it is and not worry about having the lender average out your income from the last two decades instead. Make sure you are accurate in stating your income, because the lender might be able to obtain past taxes from the IRS to confirm it. When you do a stated income loan, this will put more emphasis on your down payment or credit score. So, you will usually absolutely need one of these factors to be strong if you want to go this route. Most of the measure when you do a stated income or no doc loan, you will be charged a slightly higher interest rate because of the excess risk the lenders carries.

C. Put together a profit & loss statement stating accurately stating your profits and expenses from the last two years. This could be a measure consuming project, but it may sometimes be used as income verification for a lender. It is more usable if you have had it signed or verified by your accountant.

There are many ways that lenders can work with you if you are self employed. There are many programs available to help you and if you have a down payment or decent credit, you are almost guaranteed to be able to get approved somewhere.