Do you own a business and want to buy your own house? Wondering if you can get a VA loan if you’re self-employed?
Self-employment can pose unique challenges when purchasing a house. The income of self-employed individuals can be less consistent compared to those receiving fixed monthly salaries.
Because of the inconsistency, lenders often scrutinize the application of self-employed home buyers. Applicants are required to submit a least 2 years of income tax returns and business documents to get a VA loan.
You are considered a self-employed when you meet any of the following criteria:
- You are the sole owner of the business
- You own at least 25% of the business
- You are working freelance
- You are a contract worker
Lending policies and guidelines of VA loans for self-employed veterans are different for each lender.
Self Employed in the Family Business
If you are working for a family-owned business, you will not be considered as self-employed unless you own 25% of the company. This ownership should be confirmed by a third-party figure. In addition, you are required to submit tax returns for 2 years and the business should have been active for at least a year.
Self-employed individuals should also understand that lenders only consider the income which you pay in tax. Any amounts that are not documented are not counted.
Freelance Workers and VA Loans
It is possible for freelance workers to get a VA loan. With modified paperwork requirements, lenders can give you a positive feedback. Individual tax returns and all applicable income documents for 2 years should be submitted.
In self-employment, stability is only considered if the business has been operating for at least 2 years. In addition, a profit and loss statement for the current year is required if the taxes have not been filed.
Documents Required for Self-Employed Individuals
The challenge is being able to show the lender that your business is on a solid financial ground. For self-employed qualified military borrowers, heavy paperwork is required to process your VA loan.
To gauge your income trajectory, lenders will look to at the two-year income documents. This will determine if you have the ability to repay the loan. A major red flag in your application is when your income decreases each year. In most cases, the lender will require you a written explanation of the drop. If the descent is huge, your application will be declined.
Lenders need a healthy amount of information to decide to give you the loan in addition to the usual requirements listed on the VA loan application. To apply as a self-employed veteran, you need to dig up these required documents:
- Current financial statement – this should include a year-to-date profit and loss profit
- Two consecutive years of individual income tax returns
- Two consecutive years of business tax returns – this is required for corporation or partnership
- List of your partners or stockholders
Conclusion
Yes, you can get a VA loan if you’re self employed. Collecting the required documents may sound exhausting, but it is reasonable for lenders to get as much information as possible to show that your business is reliable and sustainable.
Jimmy Vercellino and his team can help you get the paperwork needed to get your loan approved, guiding you through the process. Call today and let’s get started!
