Last Updated on August 24, 2023 by Eric Jeanette
If you work as an independent contractor, you will want to review mortgage information that pertains to your unique employment. Contractors may still be eligible for traditional mortgages, such as conventional and FHA loans, but your mortgage application will be reviewed more closely.
The most important aspects of your application that will be looked at are your income and credit. Mortgage lenders want to see that your income is both stable and reliable. It is even better if it appears to be increasing year over year, but this is certainly not a requirement. If you make seasonal income, which is common with various types of contractors, you may still be able to qualify for a mortgage. How this works, is your total annual income will be divided over 12 months to create a monthly average (such as with bank statement loan programs for self-employed borrowers).
There are many types of contractors, with some of the most common types being: carpenters, electricians, general contractors, home remodelers, landscapers, painters, plumbers, and roofers. Of course, there are other types of contractors not featured here, but these are some of the most common. If you work as any type of independent contractor, you should find the information provided below useful in finding a home loan.
Mortgage Programs for Independent Contractors
Below are some of the best home loan options for independent contractors:
Conventional – It is always advised that you first see if you are eligible for a conventional loan. The reason for this is that conventional mortgages typically offer better loan terms, such as better interest rates. Fortunately, the lenders we work with offer very competitive conventional loans, so if you meet the qualifications, you may be able to obtain an excellent home loan.
FHA Loans – The FHA insures mortgages, which allows lenders to issue home loans that they might otherwise not be willing to do. FHA loans are great for people looking for a low down payment. With a credit score of 580 or higher, you may get approved for a down payment of only 3.5% of the purchase price. FHA loans also have more lenient qualification guidelines than conventional loans, allowing more borrowers to get approved.
Bank Statement – A bank statement loan allows you to prove your income without using any tax returns. How this works, is you will need to provide either 12 or 24 months of bank statements (personal and/or business bank statements, which depends on the specific lender). These programs are great for self-employed contractors, as well as people who make seasonal income.
1 Year Tax Return – Are you newly self-employed? Or perhaps your income took a leap this last year compared to the year prior? A 1 year tax return mortgage allows you to prove your income with only your most recent year’s tax return.
USDA Loans – The USDA rural development loan offers a 100% financing mortgage, meaning that there is no down payment required! This program is available to borrowers who meet certain income limits, as well as other loan requirements for USDA loans. The minimum credit score needed for an automated approval is a 640. However, it is still possible to get a manual approval with a credit score below a 640 (rarely are applicants approved with a credit score below 600 though). Keep in mind that these loans are only available in rural areas. They are not available in cities or larger towns (however, just outside of cities are in eligible zones).
Bad Credit Mortgage – If you are not able to get approved for any of the programs listed above, there are some special non-prime loan products that allow borrowers with bad credit (even very bad credit) to obtain a home loan. Typically, these mortgages require a much larger down payment though (20% or higher).
The above loan programs are some of the best options for independent contractors. You may view some general information on home loans for self-employed borrowers. Or if you would like to speak with a loan representative, and see what you qualify for, you may do so by requesting a free mortgage consultation.
Mortgage Lenders for Independent Contractors
We work with several great mortgage lenders that offer home loans for contractors. If you would like some assistance determining which lender may be best suited for you, fill out this form to be matched with a mortgage lender.
Quicken Loans – Good option for FHA and conventional loans.
US Bank – Good option for FHA and conventional loans.
Acra Lending – Good option for bank statement loans.
Northstar Funding – Good option for bank statement loans and bad credit mortgages.
Angel Oak Mortgage Solutions – Good option for bank statement loans and bad credit mortgages.
Prime Lending – Good option for USDA loans.
USDA Loan Agency – Good option for USDA loans.
Frequently Asked Questions
What if I work in more than one field as a contractor?
If you work as a general contractor, or in multiple fields as a contractor, you should be able to use all of your income to qualify for a mortgage. If you are unable to prove all of your income using tax returns, you may want to consider a bank statement loan. Bank statement programs typically will allow you to us all deposited income as qualifying income.
What if I changed my business name?
If you have changed your business name, or operate under more than one company name, you may be able to still qualify for a number of mortgage programs. It will be up to the loan underwriter, but as long as there hasn’t been any significant reductions in your income, it should not be an issue. Mortgage lenders ultimately want to see that your income is stable and reliable. If your employment or income is deemed to be too unstable or unpredictable, this could cause your application to be denied.
What refinance loans are available for contractors?
Contractors may qualify for nearly any traditional refinance programs, such as conventional, FHA, and USDA refinance loans. There are also some unique non-prime refinance loans for people who do not qualify for traditional mortgages. We can help you determine what options may exist for you to refinance.
If I have had a major credit such as a bankruptcy or foreclosure, will this disqualify me?
A major credit event, such as a bankruptcy or foreclosure does not automatically disqualify you from getting a mortgage. There are certain waiting periods for conventional and FHA loans (2-3 years in most cases). However, some mortgage programs do not require any waiting periods, meaning that you may be able to get a mortgage even just 1 day after a bankruptcy or foreclosure.
Do you have questions that you do not see listed here? Send us your questions, we are here to help! You may email us directly at firstname.lastname@example.org, or you can fill out this form to speak with a loan representative.