Qualifying for a Loan When You Are Self-Employed
Getting a home loan today is tougher than it has been in the past. Lenders are required to follow a plethora of rules and regulations to ensure and prove they are funding qualified loans to responsible borrowers. Here is what you need to know if are trying to qualify for a loan as a self-employed borrower.
Verifiable Income – Tracking your income is generally more complicated when you’re self-employed. Forms usually associated with tracking income for the self-employed include Schedule C, Form 1120S or K-1 depending on the structure of your business.
Organization – Have your past tax documents in order and prepared to be shared. These documents are important for tracking your financial history, especially as it relates to your income.
Good Credit – Ensuring you have a good credit score is also imperative to the self-employed. Lenders want to see that although your income could fluctuate (sometimes drastically), you still manage to maintain a high level of financial security. This will help establish you as a reliable borrower.
Keep Accounts Separate – It can be difficult to completely separate your personal expenses from your business expenses. However, the more accurately you can do this, the better it will be for you during the home loan process. Having your accounts and financial history separated will allow a lender to more easily track your spending habit and savings in correlation to your different ventures in life giving them a more accurate reading on the loan you qualify for when purchasing a home.
Sources researched include Investopedia, Forbes, and LifeHacker