When you’re self-employed there are challenges, just because you’re in business for yourself. For example, you want a mortgage? Good luck with that.
Qualifying for a home isn’t easy, period. But if you’re self-employed, the process can be even more onerous.
Why? For one thing, “Most self-employed people take advantage of the tax benefits available to them, utilizing accepted accounting practices to reduce their taxable income,” says Warren Goldberg, president of Mortgage Wealth Advisors in Plainview. “This is a double-edged sword, because it reduces the qualifying income lenders calculate, and the amount they may borrow.”
The process is tough, but doable. Here are a few pointers to help you get that loan.
Come ready to play: “Most banks will want you to put more down because in their mind you are a higher risk than a W2 employee,” says Collin Bond, a broker with Triplemint in Manhattan.
You should be able to show at least two to three years of consistent income. It’s better still if you have a hefty nest egg in reserve to cover you in case your business revenue declines.
Think ahead: Lenders will review your most recent two years’ filed taxes and average them to calculate qualifying income. Says Goldberg, “Start thinking two years in advance about how your tax filings will ultimately affect your ability to obtain a mortgage.”
Be creative: Know where to go. For example, consider checking out a lending institution in the Community Development Financial Institution program. As a CDFI member, Quontic Bank, with offices in Melville and Astoria, can offer unique loans. Says Steve Ho, senior loan officer, “We have a ‘Lite Doc’ product that does not require a W2 or traditional pay stub. It specifically helps low-to-moderate income people and small-business owners get funds.”