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January
9
9
How to Buy a House When You're Self-Employed
5 Tips for Buying a House When You're Self-Employed
The digital age has helped make self-employment a reality for more people than ever before. While self-employment has many benefits, it also poses some unique challenges when it's time to secure a mortgage and buy a house. Mortgage lenders want to see proof that your income and business are stable, so it's important to plan ahead for the process.
Our REALTORS® are here to help with a guide to buying a house as a self-employed shopper.
- Tips for Securing a Mortgage and Buying a House
Let's say you're shopping for homes for sale in Brighton, and you find the home you're looking for with an asking price that fits comfortably within your budget. The information-gathering and negotiation process will look very similar to what it would be if you weren't self-employed, but making sure that you can secure a mortgage will require a little extra work on your end. - Lenders Want to See Proof of Steady Income
The biggest difference in securing a mortgage when you're self-employed is that you won't be relying on a W-2 form to prove your income. A W-2 makes it easier to prove your income in the eyes of lenders, and you'll typically just need a W-2 from one year to get the job done. Self-employed shoppers will have to rely on either a 1099 or a statement of profit/loss to prove income while also providing data from multiple years. - Preparing Paperwork Is Key to Landing a Mortgage
Since the burden of proof is a bit higher for self-employed shoppers, you'll want to make sure that everything is in order when it's time to secure a loan. More than anything, lenders want to see a stable, reliable income before you buy a house which means that a relatively new business will require a higher level of proof. So if you started your business within the last two years, there's a good chance your lender will want to see data from both of the years you've been in business. However, if you've been running your own profitable business for five years or more, your lender may be more comfortable looking at only your most recent year of financial data. - Remember that Lenders Calculate Income After Deductions
As a self-employed person, there's a good chance you're scouring your financial data each year to make sure you're claiming all tax deductions available to you. While deductions make life easier at tax time, claiming too many can cause some challenges when it's time to secure a mortgage. Lenders calculate your income after deductions, so too many deductions can leave you with a lower net income when it's time to land a loan. - Owning a Home as a Self-Employed Person Is an Attainable Goal
While there are some added challenges when you want to buy a house as a self-employed person, don't think your goal of homeownership is out of reach. As long as you're willing to take a little extra time to prepare – and plan ahead at tax time – you'll be in great shape when it's time to secure a loan and buy a home. Your real estate agent and financial adviser should be valuable sources of advice, throughout the process.
Whether you're self-employed or work for someone else, our experienced team at Griffith Realty is here to help with all of your real estate needs. Contact us to buy and sell homes throughout the Livingston County, MI area.