Those of you who are self-employed have chosen to be for a variety of reasons, some by design, some by necessity. Whatever the reason, you have achieved success or are on the road to doing so. The idea of success, of course, is subjective. It depends very much on who is evaluating your business. And those of you have sought mortgage or business financing in the past know only too well that the lending institution's idea of success can often be very different from your own.

There are many good reasons how and why lending institutions make their lending decisions -- too many to mention here. Besides, the average self-employed borrower is really only interested in how to qualify for a loan. Having said that, there are many mortgage lenders who understand that entrepreneurs may have owner's benefits beyond simply the wages that appear on their tax returns.

As an entrepreneur, you will fall into one of two categories:

1. Self-employed for less than 2 years

2. Self-employed for greater than 2 years

Before we discuss options in greater detail, it is important to note that there are not necessarily absolutes in either category, but rather general rules of thumb. The "whole picture" of your situation is what really decides which mortgage loan program will work best and what options are available. Whether a refinance or a purchase, first you'll need to ask yourself the following questions:

**What is my money doing for me currently? Does it make sense to leave as much of it as possible were it is and earn a greater return than the interest I would pay?

**Am I comfortable with the cash flow in my business? Or is maintaining maximum liquidity more important?

**Would a greater interest reduction be more beneficial to me at tax time?

**How much monthly housing expense am I comfortable with?

**How long do I intend to own this home?

**What do I project my financial position to be in 2-5 years?

Once you have answered these questions and perhaps consulted with your accountant, you will be better prepared to select a residential mortgage loan program.

Self-employed for less than 2 years is undoubtedly the toughest of the two categories to finance. The two-year mark is much like a magic number for most lenders. If you do not have two years of business history, you will not fall into the standard no-income verification program. What you really need is a no income, no job and perhaps even no asset verification program -- yes, such a thing does exist.

Guidelines for the Less Than 2-Year Self-Employed Borrower

Program Options -- both fixed and adjustable rate options exist. The best rates will usually be in adjustable programs.

Percentage Down -- Options begin with as little as 10 percent down.

Key Lending Decisions -- Appraisal of the property and borrower's credit rating.

Interest Rates -- Interest rates will vary depending on the type of program, percentage down and credit history. Twenty percent down or more will improve the rate. Asset verification may or may not improve the rate.

Credit -- Credit scores, often used by the mortgage industry to make a "picture" of the borrower's positive and negative risk factors, are important. There is not necessarily a minimum, but there will be a check for clean credit over the past 24 months and no major financial problems such as bankruptcy or foreclosure.

Self-employed for more than 2 years leaves virtually every door open. For those of you who show a substantial income and or profit, there are many lending options. It is important to note, however, that the best analysis of your tax returns will very much depend on the knowledge and experience of the loan officer processing your loan.

For the purpose of this article, we will limit our scope to those who don't show enough taxable income to qualify for a traditional loan but do have assets, therefore requiring a no-income verification program.

Guidelines for the More than 2-Year Self-Employed Borrower

Program Options -- Both fixed and adjustable rate options exist. However, the best rates will usually be in adjustable programs.

Percentage Down -- Options begin with as little as 5 percent down.

Key Lending Decisions -- appraisal of the property and borrower's credit rating. Lenders will also examine verifiable assets and cash reserves, which is the money you show in the bank after your down payment. Other programs exist where there is no asset verification.

Interest Rates -- Interest rates will vary depending on the type of program, percentage down and credit history. More than 10 percent down will improve the rate, and 20-25 percent down in substantially improve the rate. Asset verification will also greatly improve the rate and program options.

Credit -- Credit can be the key determining factor, and credit score minimums may apply for certain programs. There will be an examination for clean credit for 24 months and no major financial problems such as bankruptcy or foreclosure.

The self-employed borrower is perhaps one who can benefit most by using a mortgage broker. A good broker can present you with the most programs, interest rates and percentage down options. A broker who specializes in servicing the self-employed borrower is your access to the best lenders to meet your needs.

As with all key buying decisions, do your homework, understand what is available to you and, most importantly, choose a lender with whom you feel comfortable doing business. And, of course, may your success and prosperity continue.

Lorelei Hummel is vice president of Sunshine Mortgage of South Florida. Specializing in servicing the self-employed and high net-worth borrower, Sunshine Mortgage is a licensed correspondent and equal opportunity lender, servicing all borrower profiles and serving all of Southwest Florida with offices in Fort Myers and Naples.