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Self Employed Borrower Mortgage Qualification Requirements

I want to apply for a mortgage in two years. I just started my own business and my credit score is relatively high. What should I do so that I can qualify for a mortgage in two years?

Michael Jensen, Mortgage and Finance Guru
, Mortgage and Finance Guru

As long as your financial and credit profiles remain relatively constant then you should be able to qualify for a mortgage in two years. You can use our Mortgage Qualification Calculator to determine what size mortgage you can afford based on your monthly gross income and debt payments as well as current and expected mortgage rates. Rates are currently very low and it is impossible to predict where mortgage rates will be in two years. If rates increase over the next two years it may be more challenging to qualify for the loan amount that you want because the higher the mortgage rate, the lower the mortgage amount you can afford.

Based on the information that you provided it sounds like you may be self-employed. Most conventional mortgage programs require a two year job history for self-employed applicants, as evidenced by the borrower's tax returns (Schedule C on form 1040), to qualify for a mortgage. For self-employed borrowers, lenders typically use your average monthly gross income over the prior two years to determine what size mortgage you can afford. The key is being able to use your tax returns to verify and document your income for lenders. Please note that the employment history requirement for self-employed borrowers for an FHA Mortgage is more flexible. Depending on certain factors, FHA mortgage guidelines permit a self-employment history of between one and two years if your self-employed job is in the same field in which you have previously worked.

In addition to your employment history, lenders also consider other borrower qualification guidelines including your debt-to-income ratio and credit score to determine your ability to qualify for a mortgage. While your credit score is high today, any changes or declines in your score can make it more challenging to qualify for a mortgage. Additionally, if possible you may want to pay down some of your monthly debt to improve your debt-to-income ratio. Lenders use your debt-to-income ratio to determine what size mortgage you can afford and the lower your monthly debt payments, the better your debt-to-income ratio and the more mortgage you can afford.

In short, I think you are well positioned to qualify for a mortgage in two years but maintaining or improving your financial and credit profiles will help ensure a successful outcome when you apply for a mortgage.

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About the author

Michael Jensen, Mortgage and Finance Guru

Michael is the co-founder of FREEandCLEAR. Michael possesses extensive knowledge about mortgages and finance and has been writing about mortgages for nearly a decade. His work has been featured in leading national and industry publications. More about Michael

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