How to Handle Your Mortgage if You're Self-Employed or Have Irregular Income
Being your own boss or earning income from multiple sources can be financially rewarding, but it may also complicate things when applying for a mortgage. Traditional lending standards often cater to W-2 employees with consistent paychecks, leaving self-employed individuals and those with irregular income facing unique challenges.
Here’s how to successfully navigate the mortgage process if you’re working with a non-traditional income stream.
1. Understand Lender Requirements
Mortgage lenders look for stability and the ability to repay the loan. When your income isn’t straightforward, they often ask for additional documentation to verify:
Two years of self-employment income, usually via tax returns (including all schedules)
Profit and loss statements (especially for recent quarters or the current year)
Bank statements to show cash flow and reserves
Client contracts or invoices as supporting documentation
Pro tip: Try to avoid large write-offs or deductions that drastically reduce your net income, especially in the two years before applying for a mortgage.
2. Work with a Mortgage Broker or Specialist
Not all lenders treat self-employed borrowers equally. A mortgage broker or loan officer experienced with self-employed applicants can connect you with lenders who:
Use bank statement loans or alternative income verification methods
Consider your gross income or average earnings over 12–24 months
Are open to working with gig economy or freelance workers
Having a knowledgeable advocate can make all the difference.
3. Improve Your Credit and Save for a Larger Down Payment
A strong credit profile and a larger down payment can help offset perceived risks in your income. Here’s how:
Aim for a credit score of 700+ to access better rates and more favorable terms
Save at least 20% if possible, though some lenders accept less with good credit
Build cash reserves to cover 6–12 months of mortgage payments, proving you can weather income fluctuations
4. Stabilize Your Income (Where Possible)
While you may not be able to control all aspects of your income, you can:
Diversify your client base to reduce dependency on one source
Set up a consistent payroll for yourself if you own a business
Create a budget to ensure predictable monthly personal income
Stability, even if self-created, helps reassure lenders.
5. Be Prepared to Explain Your Situation
Your mortgage application is your story—tell it clearly. Draft a letter of explanation that outlines:
The nature of your work or business
Why your income is stable and likely to continue
Any fluctuations and how you manage them
This humanizes your application and helps underwriters better understand your finances.
Final Thoughts
Getting a mortgage when you're self-employed or have fluctuating income isn’t impossible—it just takes more preparation. With the right documentation, lender, and strategy, you can secure a home loan that fits your unique financial situation.
Need help navigating the mortgage process? Contact us today to speak with a mortgage expert who understands the ins and outs of self-employment and non-traditional income!