If you’re self employed getting a mortgage can be a pain in the you know what. As a business owner, more than likely you don’t fit into the cookie cutter perfect scenarios that people with normal W2 jobs tend to have. Your income might be all over the place and come from different sources. You might right off a lot of your income to avoid paying Uncle Sam all of your hard earned money.
Have Your Ducks in a Row
Make sure that you’ve got all your documentation together. Underwriters can be more stringent when it comes to self employed borrowers. You may need more documentation about your overall financial picture than our 9-5 friends. Additional years of tax returns, profit and loss statements, 1099 forms, and possibly even a signed letter from your accountant that states you’re still in business. Having this documentation ready will save you from headaches later in the process.
Don’t Write Off All of Your Income
Writing off your income will help you to pay less taxes but it won’t help you qualify for a mortgage. You may bring in a good amount of income but since you’ve wrote it off we can’t use it as income to qualify your for a mortgage. If you allow more of your income to be taxable you’ll be able to use it to qualify.
Keep Your Business and Personal Finances Separate
Using a business account to keep your personal finances separate from your business will help you to get approved for a mortgage. It can help give a clear picture of what the business pays for and keep it off of your personal income and credit score.
Try Using a Bank Statement Program
If you’re someone who writes off a lot of their income a bank statement program may be the way for you to go. A bank statement program is an alternative loan type that allows business owners to use deposits made into their bank account as proof of income instead of traditional methods like pay stubs or W2s.
To calculate your income, deposits into your bank account over a 12 month or 24 month period are added together and averaged to determine your monthly income. If your deposits are into a personal account, we’re able to use 100% of your income. If you’re using a business account to qualify for the program only 50% of the deposits can be taken into account.