How To Buy A House When You're Self-Employed

CENTURY 21 Mertz & Associates October 8, 2023

Being self-employed is the dream of many Americans. While it's a dream that offers individuals many unique career opportunities, it can be a nightmare if you are trying to buy a home. Buying a home doesn't have to be a challenge. If you are self-employed, start preparing for the application process early. This will give you plenty of time to collect all the right documentation and establish a financial history that is both stable and prosperous. Our real estate agents can provide you with several tips that will help you get ready to start looking for your forever home.

Document your income properly – Document all of your income as accurately as possible. Keep copies of all the invoices you send to your customers as well as the receipts you send in return. Talk to an accountant or tax professional to learn the best way to organize your income. This will help if you have more than one form of revenue.
Be able to verify eligible income – When you are self-employed, lenders look more at the stability of your income rather than the type of income. Being able to prove how you make your money is an essential part of the mortgage approval process. No matter what type of income you have, make sure it is verifiable. Seasonal jobs and part-time work are fine if they can be verified.
A longer application process – It usually takes longer for your income to be verified if you are self-employed. This can extend the process by a few days or a few weeks. It all depends on your ability to prove your income and the stability of your financial health.
Know your debt-to-income ratio – It doesn't matter if you are self-employed or not, your debt-to-income ratio is an essential part of the approval equation. If you have an excessive amount of debt compared to your verified income, you won't qualify for a mortgage. Know your debt-to-income ratio before you apply, and try to improve your numbers by paying down your debt.
Take fewer deductions – While people will often look for as many deductions as possible, it's actually something you want to avoid if you are getting ready to apply for a mortgage. When you're self-employed, you want the income you show on your taxes to be as high as possible. The more deductions you claim, the lower it will be.
Monitor your credit – Monitor your credit scores often. You are entitled to one free credit report per year. There are also credit reporting apps you can download to your phone that will allow you to check your credit scores daily. The apps will also notify you if your scores change or if you apply for a new line of credit.
Keep personal and business finances separate – Always keep your personal and business finances separate. Combining the two will not provide your lender with an accurate representation of either one's financial health. In order to be fully transparent, you will need to keep them separate in every way.

When you decide the time is right to buy your first home. Don't let being self-employed stop you. Before you start looking for Lewisburg homes for sale, make sure you have all of your financial information in order. Contact our office today and talk to an agent. We can guide you through the process and make sure you are ready to go when applying for your mortgage.