Self-Employed people differ from traditional employees in that the income they claimed for tax purposes is not always reflective of their actual earnings.
That reality can be a challenge when applying for a mortgage. As such, lenders allow for self-employed mortgages to have a stated income that allows us to advise the actual amount the self-employed person earns.
There are limiting factors due to the increased risk of stating an income as opposed to providing documentation to verify it. Credit scores become a point of focus and it is essential that a self-employed person have excellent credit. The most that can be loaned without paying a mortgage insurance premium is 65% of the property’s value. Any time more than 65% is needed the mortgage must be insured.
In cases where a self employed person claims enough that they can qualify for their mortgage without requiring stated income, then the self-employed mortgages become a traditional purchase or refinance and traditional rules apply.
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