How to Qualify for a Mortgage if you are Self-Employed

Even without receiving a regular paycheck, it is still possible to be a home owner. You just require having the correct information to buy a home. You may not have a regular 9-to-5 job but that doesn’t mean a home-loan approval is impossible. Many self-employed people earn a decent pay, but they have a limitation because they lack a reliable paycheck to rely on. Lacking the monthly paycheck makes it hard for them to prove their ability to service their loan or mortgage.

Save and Pay Existing Debt

Pay your existing debt and also save as much as possible. You can improve your credit score by paying off some or all of your debt. By having much less debt, your general debt to income ratio will be much lower which is to your benefit since you are a better candidate for a mortgage. When placing the initial deposit, do not use your entire savings ensure you have an emergency fund. With an emergency fund that has a substantial amount, it makes sure that you can still pay your monthly mortgage payment even if you did not have income that month.

Keep Clear Business Records

Take care of your business records so that it can be clear for lenders to see your business income. Let there be a vivid difference between your business and personal funds by using business checking and savings accounts and credit cards. Keep the invoices for the business for about four months. Ensure that you keep your records when you file taxes every year.

Legitimize your Business

Ensure you are operating a legal business by registering it. When the business is registered and is legal, you can confidently show how committed to it even when times are hard.

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Consider Minimizing Tax Deductions

One trick you can use when applying so as to show more income is to deduct fewer expenses for that year so as to report more income. However, be ready to pay more in taxes when you take fewer deductions, so talk to your accountant and consider this strategy carefully.

Take Time to Improve your Financial Profile

Most people are impatient, and they rarely want to wait for anything especially a house they have been dreaming about. Do not be in a rush, take your time and increase the amount you have in savings. Use that time to pay off other debt you might have as well as improving your credit score.

Get a Co-Signer

Using a co-signer who has better credit than you do can be beneficial to your application.

Opt for a home loan

Consider self employed home loans. You are probably asking for an amount that is larger than what most lenders are comfortable to give you. if that is the case look for a house with a lower purchase price, by doing so you will only need to ask for a smaller loan.

Purchasing a home while self-employed can prove to be difficult. However, if you follow the above tips the process will be smoother.