Are you planning to purchase a home anytime soon? If you are a self-employed individual, you have to think about how this process would work for you, as your income classification will be different from how it would be for employees. Typically, applying for home financing includes reviewing all the requirements and learning the essential things to smoothen the process. 

If you are having a problem and thinking about how to get pre-approved for a home loan as a self-employed individual, we will share vital pieces of information for you to consider:

The Homebuying Process for Self-Employed Buyers

Mortgage lenders usually see self-employed people as high-risk borrowers. Mostly, it is because it can be a challenge to prove to your lenders that your income is continuous, stable, and can handle the added pressure of a loan. Moreover, personal and business finances can sometimes be mixed together for self-employed individuals. For someone with a self-employed income, documentation is the key to qualify for a mortgage loan.

To start, as a self-employed borrower, you must look at your debt-to-income (DTI) ratio to show how your income relates to the debts you are paying for. Usually, loan programs ensure that your expenses should not exceed 45% of your total income, but it can be lower for self-employed depending on your lender.

If you think that the process of determining your DTI and improving it would be overwhelming for you, you can consult with a tax or accounting professional to work on it with you.

Home Buying Document Requirements for Self-Employed Buyers

In every home loan application, the success lies in the documents you have ready. These days, because of the COVID-19 pandemic, there are changes in the underwriting requirements, where more documentation than usual is necessary to show stability. However, here are some things you should look at to start.

First, you will need to provide the most recent two years of personal federal tax returns, year-to-date profit, profit-loss statements, and balance sheets. Additionally, you may need to provide proof of bond insurance and membership to professional organizations. 

Now, on the business side of things, you must provide your business filed federal tax returns, business account statements, documents indicating your Doing Business As (DBA), and 3 to 12 months’ worth of bank statements.

You will also put together information and documents of the following:

  • Tax Identification number
  • Schedule C
  • Schedule E
  • Form 1120-S, 1120, or 1065 (as applicable)
  • K-1
  • Profit and Loss Statement (P&L)
  • Letter of Verification of Self Employment from a CPA
  • Invoices if you are an independent contractor
  • References
  • Business License
  • References or letters from clients

Important Tips to Consider Before You Start the Application Process

  • Have a clearer view of your business success if you separate your personal income and expenses from that of your business
  • Prepare an emergency fund so that the lenders can see that you have cash stored in case you have trouble with your business.
  • Build your credit score. The higher your score, the better your chances for approval.
  • When in doubt, hire a Certified Public Accountant to guide you towards better financial choices.


The mortgage process may be tough, but you can conquer this challenge with better preparation. If you are looking for better ways to buy a home as a self-employed individual, you can always partner with reliable experts to help you along the way.

Liberty Mortgage Group, one of the best mortgage companies in Centennial, CO. Schedule a meeting with our best officers today and start working towards your dream home!