| If you are self-employed, you probably have heard | | | | sent directly to your bank. |
| rumors of how difficult it can be to obtain a home loan. | | | | Other ways to make yourself more appealing to |
| While working for another and having proof of income | | | | lenders in qualifying for a home loan is to do the |
| would be easier to get a home loan, don't despair. Just | | | | following: |
| because you're self-employed doesn't mean you are | | | | 1. Offer A Large Down Payment. Lenders see |
| disqualified. | | | | you less as a risk if you can offer a larger down |
| Why is it difficult to get a loan as someone who is | | | | payment. For them, if you have invested a larger |
| self-employed? Typically because it is more difficult to | | | | amount of money into your home at the forefront, it is |
| prove income and because proof of income takes | | | | more unlikely that you will walk away from the loan. |
| more investigation and work that many lenders just | | | | 2. Improve Your Credit Score - Paying off |
| don't want to deal with. | | | | consumer debt or at least paying it down will improve |
| Lenders see people in a variety of categories. There | | | | your credit score. Check your credit and make sure |
| are those who are prime borrowers, which are people | | | | everything is in order and there aren't any mistakes. If |
| who they can get approval for rather quickly as they | | | | there are, contact credit agencies or make comments |
| have great credit and verifiable income. And then there | | | | on your credit. |
| are those who are self-employed, which means | | | | 3. Put Money Away - Have money put away in |
| approval takes time. First the lender must verify your | | | | an emergency fund to show lenders you have a |
| income from your tax returns. And then they must | | | | buffer and should your business decline, you have |
| evaluate whether you have a good loan-to-value ratio. | | | | enough to make your monthly payments. |
| If you are self-employed, you know how your tax | | | | 4. Have All Your Documentation Ready - You |
| returns can look by the time you have entered all of | | | | don't want to annoy your lender by bringing in grocery |
| your business expenses. Such expenses can reduce | | | | bags full of receipts and old returns - if you haven't |
| your income drastically. When a lender looks at your | | | | already done so, put all your information together on a |
| returns, they may wonder whether you earn enough | | | | spread sheet. Neatly organize your profit and loss |
| to buy a home. With this, they may require a higher | | | | statements, previous years' tax returns and bank |
| down payment or may charge a higher interest rate. | | | | statements. |
| If you are planning to buy a home, you may want to | | | | While getting a home loan can be more difficult today |
| prepare a few years ahead, as one option. It is | | | | than it was three years ago, it isn't completely |
| possible to defer deductions and expenses for further | | | | impossible, especially for those who are self-employed. |
| years so that your returns show a higher income. | | | | There are many deals on homes right now making it |
| Once you are ready for the lender to review your | | | | more appealing for one to buy, so make the extra |
| returns, you may need to file an IRS form 4506 or | | | | effort and it could pay off for you too. |
| 8821, which requests that copies of your return be | | | | |