There is an equally long list of pros and cons to being self-employed.  On the plus side, there are things like setting your own hours and working on projects you really enjoy.  On the downside though, there is the up-and-down income cycle and managing your own taxes, health insurance and retirement accounts.  In addition, the self-employed may find that getting a mortgage isn’t so easy, either.

With the added hurdle of proving your income buying a home when you’re self-employed can be tricky.

What do you do without a W-2?

Entrepreneurs, freelancers and small business owners alike can still be approved for their dream home; it just takes a little extra preparation.

Below are some great tips to follow for those of you who are house-hunting while self-employed.

1. Keep good records.

Since self-employed income is the same as W-2 income, you’ll need to keep good records.  Unfortunately, banks will not have access to the W-2 to confirm your take-home pay, so they will need to see a copy of your tax returns as proof.

2. Check your deductions.

Remember that when you apply for a mortgage, some lenders will look at your tax returns, which will show your income minus your deducted expenses.  If you’re considering purchasing a home, you may want to consider taking fewer write-offs.  While a lesser tax break is inconvenient in the short-term, doing so will add to your net income, which may help you qualify for a higher dollar amount once you’re ready to start house hunting.

3. Boost your savings and credit score.

Everyone’s credit score is important during the home buying process, but for the self-employed, it’s especially important.  Lenders will be taking a closer look at your record as an indicator of how likely you are to pay back your loan.

4. Separate business and personal.

If you don’t already, make sure your business and personal finances are separated.  In the case of an audit, you’ll need to show that your records are separated.

5. Do your research.

Many different types of loans are available for self-employed individuals and lenders offer a variety of programs designed for every type of borrower.

6. Develop a relationship with a local lender.

Self-employed individuals should seek out a local lender.  Reason being, local companies are often more flexible, which can truly make all of the difference in the world.

7. Have a backup plan.

As any experienced self-employed individual will tell you, having a sizable savings is a must.  Save as much money as possible for your down payment.  If you have the ability to place more than 20 percent down, lenders are likely to view you as a smart investment.

So, if you’re thinking about entering the real estate market while still being your own boss then follow these tips and you’ll be on your way to being approved in no time flat.

The Certo Team
55 N. Arizona Place Suite #103
Chandler, AZ 85225
602-429-6789