As a Realtor, I am considered self-employed. I am affiliated with my brokerage (Carolina Elite Real Estate), but I don’t earn a salary, I get paid whenever I help my clients buy or sell homes and earn a commission. I’m essentially a general contractor and whether I succeed or fail is totally up to me.
Recently, I purchased a new home and had to go through the process of qualifying for a mortgage. Here is what I had to provide to my lender:
- 2 years of tax returns.
- Bank statements showing income sources
- A profit and loss statement showing my current income and expenses
- A list of other assets I had ie. savings accounts, separate checking accounts, retirement accounts.
The lender wanted to know how long I’ve been a Realtor for and what type of business I was (Sole proprietor, LLC, S-Corp). The reason they wanted to know was so they could feel confident that I consistently have been able to bring in income. Being able to show them that I have been a Realtor for over 8 years with steady income each year assured my lender that I had income stability as well as consistent income. Two very important things they need to feel confident about giving you money.
There is an exception, and it has to do with if you’ve been working in the same field for a period of time, but then decide to start your own business, also in the same field.
For example, there are some people out there who may have started as a salaried worker in a field like food & beverage but then decided to go out on their own and start their own restaurant. If you’ve been employed for 5 years or more and then open up your own restaurant, you may not need to show 2 years of self-employment history because you’re in the same field of work. As long as you’re making a similar income, you’ll still be able to provide your lender with proof that your income remains stable and consistent, but also consistency in the type of work you do.
Unfortunately, using the same example, if, after working 5 years as a chef in a restaurant you then decide to become a Realtor, that would work against you. A lender would not consider that in the same field of work and you would probably need to wait a couple of years so that you can develop income consistency and stability working as a Realtor.
The bottom line is, if you’re self-employed, it’s not impossible to get a mortgage. My suggestion would be to talk to a mortgage professional and see what your options are. They will be able to give you insight into the type of mortgage that would work best for you and also give you a timeline on how long it might take to qualify for it.
In the meantime, keep making money and call me when you need me!
