How do you buy a home when you don’t have traditional employment? With an astounding 14.6 million working Americans being self employed, you’re not alone! The process of securing a home loan can be daunting, but have no fear, these tips will help smooth out the path to homeownership!
If you’re not already preventing business and personal expenses from mingling, start now! Writing off business expenses can look like less personal income to a lender, leading to lower approval amounts or rejection. Start putting business expenses on a credit card registered to your company, which won’t look like personal debt to the underwriter of the loan, start these practices as early as possible.
Whether you have a bookkeeper or a file cabinet, financial analysis is step one. Based on your budget, set your financial limit with this handy mortgage calculator. Determine how much money you can dedicate to a down payment, and remember to factor in closing costs! Also keep in mind how long your business has been operational, as a 2 year minimum is ideal for showing growth and stability, though this can be circumvented in some cases.
Tax returns are important, but for the self employed, they don’t tell the whole story. Be sure to include 1099 forms, and Profit and Loss statements. They go hand in hand with your tax returns to prove you’re prepared for a loan.
Get Advice From The Pros
It sounds like a no-brainer, but many go into the process uninformed, riding high on the excitement of having their own space. Schedule time with a realtor (we’re always happy to talk!) and ask, ask ask! An answer now will prevent major headaches, especially during negotiation and closing. Meet with the mortgage advisor your realtor suggests. Particularly, don’t be shy about asking to speak with a loan officer who has worked with self employed applicants previously!
If you’re denied the first time, don’t lose hope! Most loans are run through underwriting software then verified by the underwriter themselves. Loans can be denied for small, sometimes avoidable details. Speak to the Lender directly to find out the reason for denial and what documentation would be needed to correct that misinformation, and then try another institution.
Seek non-conventional means
When all else fails, identify niche banks in your area and ask about their specialty loans for your situation. Some offer non conventional loans such as the AIV or Alternative Income Verification loan, others offer Stated Income loans, both of which are tailored to self employed individuals by verifying income with bank statements or similar methods.
Still stumped? Not to worry, just give us a call – we are happy to refer you to one of the many wonderful and experienced lenders that have earned our trust!