Tips for Getting a Mortgage When Self-Employed
For those of you who are self-employed and potentially looking to buy a home, today’s article is directed towards you. Keep reading for more!
There is a myth that the self-employed do not qualify for an FHA loan. To reiterate, this is in fact a myth. If your business has provided your income for two years, then it will be treated like any other source of income. The only time someone who is self-employed may not qualify, is if that is that source of income is still in the beginning stages of making a profit while still being under two years old.
It’s also important that you separate your business income from your personal income. In the event of an audit by the IRS, you’ll be required to distinguish between personal and business finances, so to keep them separate from the beginning will lessen your stress in the event of an audit. To elaborate on finances, keep an open mind when it comes to your lending options. If a mortgage is not feasible for you, you can potentially borrow from your 401(k) or IRA. While this is not ideal, it is an alternative if you are desperate. You should also be prepared to plan carefully around your taxes as you have to pay employer and employee shares of Social Security/Medicaid taxes.
The last piece of advice we have to offer is to have a backup plan and don’t hesitate to involve professionals. They can guide you through all the confusing financial technicalities, so good luck and happy hunting!