If you’re an entrepreneur with plans to expand your home-based business, you might be thinking about going house-hunting. After all, an entrepreneur living in an apartment with big plans for their company will need more space eventually! However, you might be wondering how to apply for a mortgage when you don’t have a traditional job. With these helpful tips from Cruxfinder, you’ll be able to navigate the process a lot more easily.
Increase Your Income as Entrepreneur
As an entrepreneur, you’ll need to prove to lenders that you have a stable income. Your chances of qualifying for a mortgage will improve if you can show several years of increasing income. Focus on growing your business and consider how you can bring in new customers or clients.
Reduce Your Tax Deductions
If you want to show increased net income year after year, finding ways to reduce your tax deductions can actually help! Yes, many entrepreneurs want to write off lots of expenses whenever possible, but remember, you want to show lenders that you have adequate taxable income to make your mortgage payments.
Work with a great accountant to come up with a strategy for strategically lowering your deductions; Business.com suggests finding someone who is a fiduciary and checking your state’s CPA society through The American Institute of Certified Public Accountants.
Pay Down Your Debt
Lenders like to see potential homebuyers who are carrying little debt — or, ideally, no debt at all. This applies whether you’re an entrepreneur or an employee. To pay down your debts, CreditKarma recommends reducing any unnecessary spending and sticking to a strict repayment plan. You can also look for coupons and cash back deals when shopping. And once you’ve paid your debts, you can make larger contributions to your down payment savings!
Boost Your Credit Score
You’ll need to provide lenders with a credit report, so it’s time to find ways to boost your credit score! Reduce your credit utilization rate for the time being by avoiding the temptation to apply for new cards, as this can temporarily lower your score. Use your existing cards responsibly! Also, if you need to spend some time boosting your credit score and income, it might be better to rent a space where you can live and run your business.
For instance, prices in Sacramento start at around $700 a month. You can do a quick search for something that meets your budget and other personal criteria, such as pet-friendliness and number of bathrooms. If money is tight, spending a little time in a rental to improve your cash flow can help ease stress levels, too.
Organize Your Documents
When it comes to home loans, you need to make sure you’re getting the best mortgage rates today. When you apply, you’ll need to show proof of income, and as a business owner, you can do this by providing your lender with 1099 forms from your clients. If you tend to find yourself scrambling to get your documents together only when tax season rolls around, set up a filing system now! That way, you can show lenders proof of your income and assets easily.
Buying a Home
Once your finances are in order, you’re ready to start the homebuying process. Consider your loan options from different lenders to compare interest rates and ensure that you’re making the right financial decision. You’ll need to find a real estate agent who understands your business needs, and you’ll want to ensure that any homes you consider have enough room for a home office.
You may be able to save on a new home by looking in cheaper neighborhoods, buying a condo, or purchasing a property “as is.” This means that the seller will not be responsible for fixing structural problems before you move in. While this will generally allow you to secure a cheaper price for your home, you’ll also need to account for the cost of renovations. Therefore, if you’re thinking about buying a house “as is,” you’ll want to talk to a lawyer first, inspect the property personally, and check out the land records to ensure that you identify any red flags.
When you run a business, securing a mortgage can be complicated. Careful, advanced preparation is the key. By following the tips outlined above, you’ll be able to qualify for a mortgage and find the perfect home!
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