What do you need to know about a self-employed home loan? According to the Pew Research Center, nearly 16 million workers in the US consider themselves self-employed. If you're one of the many self-employed workers in America, take a look at what you need to know about home loans, a 1099 income mortgage, and financing your future property purchase. 

Are There Different Home Loans for the Self-Employed?

It's not the loan that's different—it's the process. You can apply for the same loans that someone with a traditional or employer-based type of job would also apply for. But this doesn't mean what happens next will look the same for you. 

What Types of Loans Can You Apply For?

The primary types of home mortgages include the conventional loan, a jumbo loan, and a government-insured loan. You can also choose the term of your loan (the number of years you will divide the payments over) and whether you want a fixed-rate or adjustable-rate mortgage. 

As the name implies, a fixed-rate mortgage has the same—or fixed—rate throughout its term. But this doesn't mean your monthly mortgage is fixed. While the interest rate won't go up or down, your mortgage payments could change. Increases or decreases in home insurance or property taxes create escrow shortages or overages. These can affect the amount you pay monthly. 

An adjustable-rate mortgage starts with a fixed rate. After the introductory period, the interest rate may change with the market. These mortgages typically have rate caps to reduce the risk of skyrocketing payments.

How Is the Loan Application Process Different?

Income verification is a crucial part of the mortgage loan application. Unlike employer-based workers, you don't get a W-2 at the end of the year. You also may not get a paycheck or have pay stubs as evidence of your weekly, monthly, or annual income. This can make the loan process more challenging to navigate.

Not only do self-employed people have to find alternative ways to provide income verification, but some lenders may also need additional proof that the applicant has income. While traditional employer-based workers may have a steady 40-hour schedule every week, self-employed people may only work under certain conditions or may work more/less during different times of the year. This can also make getting a home loan more difficult—but not impossible.

Instead of a W-2 application, you may have a 1099 income home loan. Many lenders will require you to submit your 1099 form (or forms) as part of the mortgage application process. 

What Is a Bank Statement Loan? 

A bank statement mortgage refers to the use of your bank statements as part of the income verification process. Along with other credit information, the lender may use your business banking statements to qualify you for a loan. This is an option for self-employed people who don't have 1099 forms or tax returns to use as proof of income. 

Contact a local loan service to learn more about self-employed home loans.