For someone who works for themselves or isn’t necessarily salaried (non-W2 income), buying a home can prove to be a challenge. We spoke with local lender Jeremy Kingsbury of Vellum Mortgage for his expert advice on how to buy a home without a traditional income.
Jeremy’s best advice: as early in the process as possible, contact a lender to help you discover any qualifying income you might have.
It’s important to note that with almost all cases of non-W2 income (self-employed, 1099 contractor, someone in sales and paid commissions, etc.) your lender will need to see a full two year history of income on tax returns. For example, if you started your business in 2022, then your lender would have to wait until your 2023 taxes are filed to be able to offer financing.
If you work for yourself, you may have the benefit of being able to write-off many expenses, the saying in the lending industry goes: “your accountant is your best friend until you need to buy a house.” Write-offs are helpful in reducing your tax liability, but they may burn you when you go to buy a home. Talking with a lender as early as possible will allow you to discuss options. The year you want to buy, you may need to avoid write-offs so that your income is higher– this will give you more leverage for buying a house.
A non-W2, declining income is a big red flag and can really be a big problem for underwriting. If this is the case, possibly because of the market or because of the ebb-and-flow of your job, this may cause problems with being able to secure a loan. Be sure to discuss with your lender as the lender can help show the history of the market– maybe your particular line of work is up and down based on various factors and the past year was down, but is projected to go up.
The bottom line: it’s not a smooth and straightforward process to buy a home without a traditional income, so it’s imperative to reach out to your lender as soon as possible in the process to determine your best options. If you have any questions we are always happy to help. We work closely with excellent lenders, and would love to make the introduction for you.