Self-employed have a tough time landing mortgages, but it's still possible


For a brief heady period, freelancers and the other self-employed folks found it easy to secure a mortgage: all that borrowers with a reasonably good credit score had to do was write in their income and swear with all the power of their own signature that, indeed, that was what they made. Also known as "stated income" mortgages, they were obviously susceptible to fraudulent borrowers and those whose income was unstable or temporary. By 2008, when the term "liar loans" started appearing in headlines and teaser clips, the boom was over, and for many hopeful borrowers -- even the honest ones -- so were the chances of owning a home.

The real pity is that when the recession cost so many people their jobs, it also cost them their ability to get a mortgage or refinance an existing one. Many unemployed workers turned to entrepreneurship and launched their own businesses -- putting them in the ranks of the self-employed. Yet, many of these new business owners haven't worked in this capacity long enough to rack up the two years of tax returns for their small business that lenders require. Worse, if they spent significant amounts of money to start up their business -- and ended up with a loss on paper, or just a nominal amount of income -- they will be evaluated skeptically by even the most small business-friendly of lenders.

But all hope is not lost. Believe it or not, the self-employed and freelancers of the world can still get a mortgage. It will, however, take a little blood, sweat and (possibly) a few tears. A pair of freelancing friends of mine bought a house near my home in 1997, and the process took several months but they're still ensconced in their sweet little home in a great neighborhood. Here's what you'll need to remember: