Refinance Mortgage Rates

When you are applying for a mortgage, usually the lender will focus on your financial history over the past 2 years. If you are self-employed, that changes the usual process a little. For one thing, you probably won’t be able to provide W-2s or paycheck stubs.
The lender will be concerned with your financial stability, and the financial health of your business. The lender will be checking two sets of documents – your personal financial records, as well as your business records.

You’ll need to supply your personal income tax returns for the past two years. If your company is incorporated, you’ll also need to supply two years of income tax returns for the business. The lender will often also request a current balance sheet for the business, as well as a current profit and loss statement. The lender will check the credit rating of your business, as well as your personal credit rating. Both will be considered in approving the loan.

The documentation you’ll need to furnish, and the way it’s viewed by the lender, depends on the structure of your business:

Sole Proprietor

Your taxable income (or net income) is considered your total revenue (or total income) minus expenses.

Corporation

The lender will need to see your corporate tax returns for the past two years, as well as your personal tax returns.

Partnership

If your company is a partnership, the lender may ask for two years of tax returns from the business.
For a long time self employed people, company directors, freelancers and people on bonuses have found it difficult to get finance for their home on a mortgage. The problem is for tax reasons the self employed person minimizes their income however in many cases they will earn much more than can be proved through certified accounts or tax returns. Because traditionally a bank or building society will only lend you 3.5 X your earnings this limits the borrowing amount of self employed people, company directors, freelancers and people on bonuses to much lower than they can afford.
For self employed people, company directors, freelancers and people on bonuses there is a specialized mortgage product called a self certification or self cert mortgage. When applying for a self certification or self cert mortgage the application just asks you how much you earn per year. The main difference here though is that you are not required to prove your earnings, the lender just trust what amount you disclosed to be correct.
Refinancing for the self employed has gotten significantly easier over the last few years, due primarily to ready availability of stated income and no income verification loans. These are loans for which there is little to no documentation required from you to substantiate your income for the purposes of qualifying for a refinance
Make sure your business is properly licensed and that your CPA is doing your books and taxes from the very beginning. Keep your credit scores up, and try to improve them wherever possible by increasing your credit limits and paying down your balances. Decide now how you are going to account for your income. Being able to document your income through tax returns is something you really should consider, whether it’s personal or, if you’re the only owner, then possibly through the business returns.
Contact a mortgage company who really specializes in refinancing the self employed about 2 months ahead of the time you want to refinance, so you can plan the process and be prepared with everything you need to get the job done properly. Now if that all sounds like a lot of work, well it is.