 TITLE: Is Refinancing Harder When You’re Self-Employed? CONTENT: What Do Lenders Look for in Refinance Applications?\n---------------------------------------------------\nMortgages are made based on personal, not business, income—but for self-employed people, the two are closely related. You are considered self-employed by lenders if you have an ownership interest of 25% or more in a business. In general, mortgage lenders weigh the following factors, whether you're self-employed or not:\n*   **Credit score**: Your business credit score is not a factor in refinancing your mortgage, but your personal credit score is. A FICO® Score☉ that's very good (740 to 799) or exceptional (800 to 850) will boost your odds of being approved.\n*   **Payment history**: Lenders will check your credit report, hoping to see a history of making debt payments on time.\n*   **Debt-to-income (DTI) ratio**: This figure reflects how much of your monthly income goes to pay debts. Your _front-end DTI_ measures your monthly housing costs in relation to your gross monthly income; your _back-end DTI_ measures all of your monthly debt payments in relation to your gross monthly income. Mortgage lenders consider both DTIs, and typically want to see a front-end DTI of 28% or less and a back-end DTI under 43%.\n*   **Credit utilization**: Your credit utilization ratio measures the amount of revolving credit you are using compared with your total available credit. If your credit utilization ratio is 30% or more, it can negatively affect your credit scores. A high credit utilization ratio may suggest to lenders that you're having trouble paying your bills and using credit to get by.\n*   **Employment history**: Lenders like to see financial stability. If you work for an employer, the lender will typically want to see you have worked at the same job for at least two years. If you're self-employed, they will want to see you have been in business for at least two years; they may allow exceptions, however.\n*   **Income**: When you're self-employed, your income may fluctuate, which can make lenders nervous about your ability to pay back the loan. Because self-employed people often take lots of business tax deductions, their adjusted gross income (AGI) may be significantly less than their actual income. Both factors mean you'll have to work harder to prove you have adequate, reliable income. END