More and more people are self-employed receiving 1099 tax forms. Many who are self-employed mistakenly think it’s impossible to qualify for a home loan. In fact, many self-employed workers won’t even apply for a home loan for this very reason, but you can improve your odds of getting a mortgage.
This may not be true in your case. Just because you’re self-employed, don’t give up on your dream. Instead, take steps to make your loan possible from a lenders standpoint.
Improve Your Odds of Getting a Mortgage
1. Lower your debt. All new buyers seeking a loan need to lower their debt to make their loan look more appealing to lenders. You’re not alone
2. Keep personal and business records separate. There’s a difference between business income and expenses and personal income and expenses. Your lender will want to know that you know the difference.
3. Deduct less on your taxes. Take honest, documentable tax deductions rather than excessive deductions that cast a shadow on your mortgage application.
4. Pay yourself like a professional. Get your licenses and set up a business structure where you’re paid through the business rather than declaring 100% of your income on your 1099.
5. Document. If it can’t be backed up with verifiable records, make no claims. Keep check stubs, proof of income, expenses, receipts … etc. You’ll look much better to the lender if you have your documentation in order.
6. Larger down payment. Though, it can be difficult, if you can make a larger down payment – then do. In some cases, you can use your IRA to boost your down payment. But talk to you tax professional to make sure they agree before you do this.
You may well quality for a loan if you’re self-employed. It’s not a deal breaker. The best thing you can do is to speak with a lender and they can let you know of additional things you can do to boost your chance of securing a loan. Get in touch with me. I’d be happy to let you know of lenders who have helped my clients in the past.