As a self-employed business person, you already know the ups and downs of being in business. You love the control and the flexibility, but may worry about generating a steady stream of income. It turns out that banks also worry about that income stream when it comes to considering you for a Denver mortgage.
Fortunately, there are several steps you can take to help achieve your dream of owning a Denver home if you are a Self-Employed Denver Homebuyers.
- Think ahead when filing your tax returns. In the current environment, banks want to look at your average income based on two years of income tax returns. Although it might help lower your tax liability to deduct all of your business expenses, don't make your net income so low that you don't qualify for a mortgage.
- Watch your credit score. It might be tempting to charge lots of new equipment on your credit card, but you could be harming your credit score and your ability to qualify for a mortgage if you aren't paying on time. If you must buy business related items, try to wait until after you've closed on your mortgage.
- Build your bank account. It's expensive running a business and paying a mortgage. Lenders want to know you have a solid cash foundation to cover all of your expenses. Plus, you'll need to have money available for a sizable down payment and closing expenses.
- Have your paperwork in order. When you work for somebody else, you have to provide W-2’s as proof of income. When you work for yourself, it gets trickier. You'll need to sign a Form 4506 which allows lenders to request your tax forms directly from the IRS and you may also need to furnish a current profit and loss statement. You could be asked for a list of clients or other sources of cash flow. Find out what the lender is going to require from you as a business owner, and then have that paperwork ready when you request a good faith estimate.
- Meet your prospective lender in person. When you run your own business, your time is one of your most valuable assets. But take some time out of your busy schedule to invest in yourself, and meet personally with a mortgage broker or prospective lender. You can discuss all aspects of your business, answer any questions directly, and consider options that might be more effective for you because you've sat down and discussed your unique situation in-depth with a professional.
If you're a self-employed business person who is ready to buy a Denver home, our team of real estate experts at Bandy Homes can answer your questions and show you some terrific homes in Aurora, real estate in Castle Rock, including homes in Castle Pines and a wide variety of affordable homes in Littleton.
Our trusted professionals will be there to help you every step of the way!
Until next time,
Marianne Bandy, Team Leader
The Bandy Team
Keller Williams Park Meadows