Being self-employed and trying to get a home loan can be very hard. Many self-employed individuals feel as though it is impossible to be seriously considered by mortgage lenders for a home loan. Luckily, there are a couple things that you can do to improve your chances to get a home loan, even if you are self-employed. Here are some tips.
1. Avoid Taking Deductions
Come tax season, you need to be very careful about the deductions that you take. When you are self-employed, you might be able to deduct a large portion of your income because many of your expenses are business related. Although this will save you money on your taxes, it will hurt you when you actually need to qualify for a house.
Most mortgage lenders take your AGI (adjusted gross income) after deductions for proof of income instead of your net income. Thus, if you are deducting a large amount of your income to save on taxes, you will end up looking like you make a lot less money and not qualify for a house.
Thus, for the years you are trying to prove income for your house, you may need to pay more in taxes so that you can actually qualify for the loan.
2. Save For A Larger Down Payment
Since you are self-employed, the lenders may see you as a bigger risk. This is why it is better if you can have a larger down payment for the house. If you have a good sized down payment for the house, the bank can recoup more of the cost of the house if you foreclose.
This may be hard for some people because saving for the down payment takes a lot of time. This may delay you getting into your house as quickly as you want, but you will have a lot more luck getting a lender to lend to you if you have a good sized down payment.
3. Ask For Less Than You Can Afford
You may be tempted to ask for the most money that you can possible afford in the loan. Although it would be nice to have a bigger home, this will hurt your chances of getting approved. Instead, you should ask for a smaller amount in the loan -- something that you can easily afford. If the bank sees that you will be able to make the payments even if business isn't going as well, they will see you as less of a risk.
These are just a couple things that you should do to increase your chances of getting a home loan if you are self-employed. Talk to a mortgage broker in Cold Lake to learn more.Share
5 October 2015
After my wife and I realized that we wanted to buy a house, we started saving like crazy. We skipped meals out with friends, wore older clothes for awhile, and put off family vacations. However, when we finally had enough money saved, we felt ready to buy the house of our dreams. However, finding that perfect paradise was a little more difficult than we anticipated. To help us to find the right place, we worked with a great real estate agent. This blog is about working with a broker to find a place you and your family will love forever.