22 Aug

Author: Karyn Winrich 

5 minute Read

If you’re self-employed or work as a contract employee, you’ll know that simple things like registering your business or managing your taxes can be complicated because of your profession. But does taking out a mortgage have to be complicated too? Not if you know how to go about it! Today, Buy Junto shares a few tips for success. 

What You Need to Know

We get it: as a first time home buyer, you have lots of questions. Before you can start filling out that mortgage application, it’s essential that you familiarize yourself with the following points: Irregular income: Lenders like to see proof of stable employment as they indicate lower risk. Verifying income: Used to writing off business expenses for tax purposes? This can become a disadvantage come loan time, as lenders can flag this as untrustworthy. Income calculations: Lenders will calculate your average monthly income by dividing the last two years of revenue by 24 (instead of gross income). This can make your income appear less than it is. 

Getting Started

Once you’ve got the income technicalities sorted, it’s time to prepare everything else. Here are some essentials you’ll need to demonstrate: Tax returns: You will need your last two years of tax returns. Business proof: OnDeck notes that you can submit a valid business license (or business account), profit and loss statements, or verification of employment from your CPA for this. Supporting documents: You’ll also need to show financial statements, personal and business credit scores, and proof that you are the principal owner of the business. 

Best Practices

Documents ready? Follow these critical steps for a successful application (and painless process): Open a business account: Organize taxes and build credibility by opening a small business bank account. Separate expenses: Make sure you’re separating business and personal expenses, as this can help you prove the origin of business income. Big down payment:Having a larger down payment will improve your interest rates, so be sure to start saving up well in advance for this one. Purchasing a home “as is”: Deciding to purchase a property “as is” will likely save you money upfront, but be aware that any repairs to the property after closing paperwork is completed will be on our shoulders. Be sure to invest in a home inspection beforehand to avoid any costly surprises after the sale. Minimal lines of credit: Don’t open new lines of credit when you’re about to apply, as this can lead to credit inquiries that reduce your score. Buying a home when you’re self-employed comes with a wide range of challenges. Stay ahead of the curve by preparing early, and you’ll be well on your way to homeownership! Buy Junto helps people buy real estate together within a system that prepares you for potential challenges that may come when co-buying. Connect with us today to learn more! +1 623-224-0842 

* The email will not be published on the website.