Being self-employed can make the process of getting a home mortgage more difficult, especially if you haven’t had this type of employment for very long. Income is one of the major factors lending institutions take into account when approving or denying a mortgage application, and it is more difficult to verify the earnings of self-employed people.

When you’re self-employed, there are usually fewer documents which provide evidence of your earning level, and it is likely to come from a greater number of sources. Your income might also be considered “less reliable” by banks, although it is true that almost anyone can lose their job unexpectedly. It can also be pointed out that most self-employed people are not dependent upon a single employer for their income; it is more likely that the income will temporarily decrease, but it has a much lower chance of being completed cut off.

You will have to do as best as possible to prove how much you earn to the bank or credit union. The Federal Reserve web site recommends getting two to three years’ worth of tax returns, balance sheets, and additional business information to bring when you first visit the lending institution to fill out an application. Be sure to thoroughly report your income when paying taxes in the years prior to applying for a mortgage.

Having a good credit record will help compensate for a less verifiable income level. If you are relatively young, haven’t needed an auto loan, and/or have never used credit cards, it is possible that you have little or no credit history. Offering to make a larger down payment and getting any false data removed from your credit record will help counteract the bank’s concerns regarding income.

A type of mortgage which is more accessible for some types of self-employed people is the “Stated Income” or “Alternative Stated Income” mortgage, which removes the need to thoroughly document your level of self-employed income. According to freddiemac.com, getting a mortgage of this type is faster but typically requires a substantial down payment and a favorable credit score.

Applying the above-mentioned tips should help you achieve greater success in getting a mortgage when you’re self-employed. Basically, it is best to use all available methods to assure the lending institution that your income will not decrease, make an effort to mitigate the perceived risk posed to them, and prove that you have paid bills on time in the past.