Being self-employed can be both a benefit and liability when it comes
to your financial life. Various tax deductions and business credits can be very
lucrative but they can also bite you when it comes time to get a home loan.
There are several ways that you can get your finances in order so that you can
be sure to qualify for a self employment home loan.
Getting a home loan when you are self-employed can be difficult. Many
business owners take advantage of several tax deductions to lower their tax
liability and write off legitimate business expenses. Unfortunately, when the
bank looks at your tax returns this can make it appear that you lost money on
your business, even if you in fact had a good year. Also, various business
loans or losses can affect your personal credit and lower your score. This can
also be a deal breaker for many traditional lenders who may laugh you out of
the bank when you come in for a loan.
While this may be embarrassing, it is also avoidable. If you are
thinking of purchasing a property, whether for an investment, vacation home, or
primary residence, there are certain steps you can take to clean up your
finances to give you the best shot of qualifying for a self employment home loan.
·
Clean up your tax returns for two years prior to
attempting to get a loan. Take less deductions to make your taxable income
higher. While you may pay more taxes, it will also make it easier to qualify
for a home loan.
·
Stash away extra cash. While factors like credit
score and debt to income ratio are important, money talks and often it speaks
the loudest. Having a large down payment and a year of living expenses in the
bank can often make you look like a more attractive loan candidate, even if your
finances are less than ideal on paper.
·
Separate your personal and business finances.
Think about incorporating your business into an LLC or other entity to keep it
separate from your personal accounts. Pay yourself a salary and charge any and
all business expenses to a business credit card. If you get a business loan,
keep it in your business name, not your personal name. Keep your business
accounts and personal bank accounts separate. This will lower your debt to
income ratio and keep all of your business taxes separate so you can still take
advantage of all the deductions you are entitled to without affecting your
chances of qualifying for a home loan.
·
Keep meticulous records. One thing that can be a
serious problem for many business owners is that it can be tricky to prove
exactly how much money you make, especially if it is coming from different
sources. Having good records will make it easier to prove your income when it
comes time to get a self employment homeloan.
When all Else Fails….
1.
A traditional loan from a non-traditional
lender. A private lender can often give out 30 year fixed mortgages to
borrowers that would otherwise be turned away by banks. Be aware that you will
most likely pay a higher interest rate but this is often worth it in the long
run.
2.
Hard money loans and private collateral loans.
Private lenders have access to different types of loans and funding that banks
do. You can take advantage of their private collateral self employment home loans that can work to your benefit.
3.
Stated income mortgage. These fell out of vogue
with banks during the housing crash but may still be available with a private
lender. There is less paperwork and your income does not require as stringent
of verification, making it ideal if your record keeping is less than perfect.
Call us a Level 4 Funding today to discuss your home loan options. We
can help you get the loan you need with the terms you deserve. Don’t let being
self-employed hold you back. We can help!
NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027
23335 N 18th Drive Suite 120
Phoenix AZ 85027
