There are many advantages to being self-employed; however, when it comes to refinancing your mortgage being self-employed could make qualifying difficult. You could consider a no-doc or low-doc mortgage where you do not have to verify income. The problem with these types of mortgages is that they typically come at a premium interest rate.
When you are qualifying for a mortgage loan, your lender will typically want to see two years of income history. Some will even require three years. You can document your self-employment income using bank statements or tax returns.
There are mortgage lenders that will accept anywhere from one to two years of bank statements to verify your income. This practice of income verification is becoming more common as lenders become more flexible. Using bank statements will often allow you to document more income than you would be able to using tax returns. Lenders will often adjust the income from your business tax returns and remove certain categories of income.
If you have trouble proving your income a no-doc loan may be your only option to secure financing. No-doc loans are very common and allow homeowners to borrow without documenting their income. Applying for a no-doc loan will force the lender to rely heavily on your credit rating, so qualifying could be more difficult. Keep in mind that no-doc and low-doc loans come at a higher interest rate because the risk to the lender is higher.