Securing a Mortgage as a Solo Practitioner: Tips and Challenges

Securing a mortgage as a solo practitioner or a self-employed attorney is possible, but it might require a few extra steps. Attorney Mortgage can help you prepare and manage the approval process for a home mortgage. 

Self-employed vs Employed

Mortgage lenders typically ask for verification of income, such as the last two years worth of W-2s and the last few months of paycheck receipts. But self-employed buyers don’t have the same proof of income, and may experience fluctuation when it comes to monthly or annual income. So lenders must ask for more paperwork to verify income and the borrower’s ability to pay back the loan. 

Lenders usually require self-employed borrowers to have at least two years of self-employment experience, or at the very least, two years of proven experience in their current field.

Some mortgage products, such as interest-only or adjustable-rate mortgages, could offer a self-employed professional a little more flexibility. Lenders may also offer a portfolio loan to a borrower. This is a loan that will remain with the original lender, instead of selling the loan to a secondary market such as Fannie Mae or Freddie Mac. A portfolio loan typically has more flexible underwriting standards. The 100%, no money down and no PMI Attorney loan is a prime example of a portfolio loan.

Your mortgage lender will ask you to provide verifiable proof of self-employed income, including: 

  • Two or more years of tax returns to demonstrate your financial stability.
  • Business licenses or certificates, if applicable.
  • Bank statements for all checking and savings accounts.
  • Business profit and loss statements.
  • Investments, existing loans, and other financial records. 
  • Proof of two or more years of self-employment experience, or proof of any related experience in the field.

How Can You Prepare for a Mortgage Application?

Before you start the search for your dream home, take an honest look at your financial health. Ask yourself these questions:

  • How much are you willing or able to offer as a down payment? Are you receiving a down payment gift from a family member or friend? If so, contact Attorney Mortgage to help you understand the legal guidelines regarding each type of home loan. Your lender will need to confirm that down payment gifts are true gifts, not loans. If you need to pay this money back at some point, it will be considered a financial obligation, and may play a role in your approval for a mortgage.
  • What is your credit score? Your credit scores are calculated from the financial information on your credit reports. The top three reports that are considered by mortgage lenders are Experian, Trans Union, and Equifax. An acceptable credit score can vary among individual mortgage lenders, but generally a minimum score of 700 is considered an excellent credit score and able to qualify for more lending opportunities. Scores that are lower than 630 are considered bad credit. But scores can be improved by tackling debt and lowering your debt-to-income (DTI) ratio. Attorney Mortgage can help you to increase your credit score.
  • How much debt do you have? If you have credit card debt or other high-interest loans, try to pay down those loans as quickly as possible. The less debt you carry, the greater the opportunity for a home mortgage qualification. If you have student loan debt, contact Attorney Mortgage to find out how you may still qualify for a home mortgage.
  • Have you gathered and organized your financial paperwork? Make sure you have up-to-date records of income, expenses, and any paperwork regarding bank transfers, financial gifts, liquidated investments, etc. Include a business plan with projections if applicable. Be prepared to show one or two months of bank account statements, both personal and business. Some banking services may charge a fee to supply that paperwork to you, so print and save any statements that are accessible and obtain the archived statements to avoid any delays.

How Can You Improve Your Financial Profile?

If you are a self-employed professional, you can make the mortgage process smoother by taking these steps:

  • If possible, separate your business income and expenses from your personal finances that may include a spouse or life partner. This will allow lenders to clearly see your financial path.
  • Immediately tackle your outstanding debts to reduce your DTI. Paying off those high-interest credit cards now – and avoiding new debt – can increase your credit score. If you pay monthly bills or utilities with a credit card, pay the balance in full every month. Have a separate credit card for business expenses and reduce your business and personal overhead if possible.
  • Keep those paid-off accounts and unused accounts open. This helps you build a stronger, longer credit history. Closing accounts could negatively affect your credit score.
  • Make it a routine to check your credit report for errors, unknown “hits,” or other inaccurate entries that could affect your credit score. Many credit card companies offer free credit reports as a part of their service.
  • Increase your income and build cash reserves.
  • Contact Attorney Mortgage to find out about attorney-specific mortgages and the guidelines for approval. 

Creating good financial habits will help you maintain a good credit score and open more lending opportunities to you when you are ready to buy that first home. Mortgage lenders will view you as a low-risk borrower who has a solid plan for repayment. 

Purchasing a home for the first time can be challenging but rewarding. If you are a newly degreed attorney, an established attorney looking for a home, or if you are ready to re-finance your home, Attorney Mortgage is here to help you navigate the loan process. Contact us or call (816) 379-6264.

Ready to find out more?

If you are a newly degreed attorney, an established attorney looking for a first home, or if you are ready to re-finance your home, Attorney Mortgage can help you navigate the loan process. Contact us or call (816) 860-1686.

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