According to the information provided by the U.S. Census Bureau, over 14 million people were self-employed in the United States in 2014. They employed an additional 29 million workers. This adds up to about 30 percent of the American workforce. You would think that with this kind of economic power the self-employed could easily get a mortgage. Unfortunately, the exact opposite is true. If you are your own boss, you will find it challenging to qualify for a home loan. But, it can be done.
Preparing For A Mortgage
Before you even start thinking about buying a home or getting a mortgage, there is some preparation work to do first. Improve your personal credit score as much as possible. It is critical in any home buying situation. Also, improve the credit score of your business. According to an Austin refinance expert, your choice of mortgage will be based on the interest rate that results from your credit score, the amount of your down payment, and several other factors. Since your income depends on it, the lender is going to look at how well the business pays its bills. Minimize the deductions you take for at least two years’ worth of income taxes. For a mortgage you need to keep your income levels up.
Gathering Information You Need
Before you start looking for a home, you will want to pre-qualify for a mortgage. For the self-employed, you will need a few things.
- Two years’ worth of income tax statements.
- A healthy down payment.
- A good credit report.
- Your accountant’s contact information.
- A track record of regular work.
Proving Your Income
Proving the income is the hardest part for most self-employed individuals. That is why the lender will want to see two years of income taxes. And why it is important to minimize deductions for a couple of years to improve the income levels after business expenses. It is also important to show the same income in each year, or an improvement in income on the second year. A decrease shows the business may be losing ground, not gaining.
Finding A Mortgage
Talk with a mortgage broker about the lenders they have worked with. They can give you insight into which lenders are friendly to the self-employed and which ones you should avoid. It can make finding a mortgage a bit easier.
Each of these tips will help the self-employed qualify for a home loan. It is more difficult to qualify for a home loan if you are self-employed, but it is not impossible. It just takes some planning and some persistence. What is holding you back from buying that home?