Yes, self-employed Denver homeowners may qualify to refinance their mortgages. However, documenting income can require more preparation than it does for borrowers receiving a regular salary and W-2 form.
Lenders must determine whether the applicant has sufficient, stable income to repay the new home loan. Business revenue alone does not necessarily establish qualifying personal income. Expenses, ownership percentage, income trends and the financial condition of the business may all affect the decision.
How Is Self-Employed Income Evaluated?
Traditional mortgage programs commonly use personal and business tax returns to calculate qualifying income. The lender may review income over multiple years and examine whether it is stable, increasing or declining.
Applicants may be considered self-employed when they own a substantial percentage of a business or earn income as an independent contractor, sole proprietor, partner or corporation owner.
Documents requested may include:
- Personal tax returns
- Business tax returns
- Year-to-date profit-and-loss statement
- Business balance sheet
- Business license or registration
- Bank statements
- Verification that the business remains active
Freddie Mac identifies income, assets, credit and collateral as central components of mortgage qualification. Lenders consider the source, history, stability and expected continuation of a borrower’s income. Freddie Mac mortgage qualification guidance
Can Tax Deductions Affect Refinancing?
Business deductions can lower taxable income. Although this may reduce a self-employed person’s tax liability, it can also reduce the income available for traditional mortgage qualification.
Gross business receipts should not be confused with qualifying income. Lenders usually account for expenses required to operate the company before calculating the income available to pay personal obligations.
Are Bank Statement Refinance Loans Available?
Some lenders offer bank statement refinance loans for qualifying self-employed homeowners. These programs may calculate income using eligible deposits shown on personal or business bank statements instead of relying primarily on traditional tax-return calculations.
Bank statement programs are often non-qualified mortgage products. They may have different credit, equity, reserve, interest-rate and fee requirements. Applicants should compare these options with conventional and government-backed refinancing before making a decision.
How Can You Prepare to Refinance?
Keep business and personal accounts separate whenever possible. Avoid unexplained deposits, overdrafts and unnecessary transfers during the months preceding an application.
Prepare complete financial records before requesting preapproval. Missing tax schedules, inconsistent statements or an outdated profit-and-loss report can delay underwriting.
You should also review your:
- Credit reports
- Existing mortgage statement
- Property value
- Homeowners insurance
- Recurring monthly debts
- Available funds for closing
- Compare the Complete Refinance Offer
Do not evaluate a refinance solely by its advertised interest rate. Compare the APR, monthly payment, closing costs, new loan balance and total interest over the entire term.
Self-employed home refinance loans in Denver can provide lower payments, different loan terms or access to equity. Careful documentation and comparison shopping can improve the likelihood of finding a suitable option.
Call Jason Today at (303) 862-4742!