8 Tips Business Owners Need To Know When Applying For Mortgage
Are you a small business owner looking forward to a home purchase this year? Excellent news! A home is a good investment. Finally buying your own house is like a dream come true.
Contrary to popular belief, being a business owner won’t make it easy for you to get approved for a mortgage. Since you’re basically self-employed, it can be tricky to apply and get approved for a home loan. The process can take longer and will require you more paperwork.
To help you realize your dream home purchase, here are eight tips every business owner needs to know when applying for a home loan.
Wait Until You’re Two Years In The Business
For entrepreneurs, it can be hard to prove your monthly and annual income, which is essential when applying for a mortgage. Most lenders ask for at least two years worth of business track record. Have you been in the industry for many years now but is starting a new business? Check with a Mortgage Lender Midland if you’re already qualified for a mortgage. Otherwise, wait until you’re able to file at least two years’ worth of taxes before applying.
Prove Your Income
Your income documentation requirements will depend on the type of business you have. Usually, you’ll need to provide at least two years’ worth of business tax returns and personal tax returns if you can. Before even applying for a mortgage, document your taxes accurately, and have a certified accountant work on your bookkeeping.
Be Able To Verify your Employment
Verifying the employment status of an employee is quite easy. But for entrepreneurs, it can be hard to check your employment when you’re self-employed. Provide all the necessary documents your Mortgage Lender Midland will ask you to support your employment history.
Provide Proofs Of Your Assets
Applying for a home loan involves submitting documents proving proof of your assets. This becomes a problem when business owners fail to separate their assets. Make sure to have a separate bank account for personal and business purposes. You should be able to pay for your down payment using your personal funds. Keep all records and receipts for bookkeeping.
Have A Strong Cash Reserve
Your Mortgage Lender Midland won’t only check if you can afford a down payment for the loan. They will also check if you have enough money left in the bank after the initial fees. Borrowers are to demonstrate their ability to finance at least six months worth of their monthly mortgage even if an unfortunate event happens. So, build up your savings before applying for a mortgage.
Build Your Credit
Another requirement is a good credit score. Being a self-employed individual doesn’t already guarantee a good credit score. Make sure to build your score and check your credit report for errors. This way, you can enjoy better terms and interest rates.
Good Read: How to Build Good Credit: A Beginner’s Guide
Declare Your Income To your Lender Accurately
Some business owners try to trick their lenders by declaring a higher income just to qualify for a mortgage. The thing is, you’ll be providing them tax documents that can prove how much you earn each month. Make sure to declare your income accurately to avoid costly consequences in the future.