Have income documentation on hand to secure a home loan.
Getting a home loan is more complicated for self-employed workers than for employees with a steady, straightforward income--but it's not impossible. It simply requires a little extra bookkeeping and homework. In order to prove your self-employment income, you will have to go to greater lengths than you would if you were getting a regular paycheck from someone else. Some banks also may require you to make a larger down payment. Plan ahead and be prepared.
Instructions
1. Produce business income tax returns for the past two years. Bankers see income from your business as a vital indicator of your ability to repay a mortgage. However, your business tax return may present a Catch-22: Most businesses deduct every possible expense to minimize profits for tax purposes, but mortgage lenders want to see a high net profit before they give you a large loan.
2. Present the financials of your business. Banks want to see that your business will continue to provide you income in the future. Current balance sheets and year-to-date income statements, viewed alongside business tax returns, can identify trends of growth or decline in your business.
3. Provide your personal income tax returns for the past two years. Banks want to see documentation about your personal income as well as your business income. If you have income from a source other than your business, such as a spouse's employment, the bank may feel you are in a better position to repay a large loan.
4. Assure truthfulness in all figures. Banks are particularly leery of fraudulent or inaccurate financial information from self-employed loan applicants. Never fudge the numbers to try to get a loan. It may be illegal. Moreover, if you get caught it is almost certain that the mortgage will be denied.
Tags: your business, Banks want, business income, home loan, income from
