If you are self-employed, you might have a hard time getting approved for a home loan as you look at homes for sale. Many people who are self-employed have a hard time proving their income and how much they actually make. This is because most lenders will only accept tax returns as proof of income, which can be hard for the self-employed. Luckily, this doesn't mean that you can't get a home loan. Instead, there are other routes you might need to take. Here are a couple options.
1. Don't Take Deductions
One of the biggest reasons a self-employed person can't adequately prove their income is that they can write off a ton of things on their taxes. When the mortgage lender looks at your taxes, they will usually take your adjusted gross income. This means that if you take a lot of deductions, your taxes won't show how much you really make. This can make it hard to get a home loan, because even if you make enough money, you can't prove it.
This is why you should be careful about writing things off in the years leading up to your home loan. You might pay a little more in taxes, but it will help you get into a home faster.
2. Get A Portfolio Loan
A portfolio loan is a great option for many people, especially the self-employed. What this means is that instead of going through a conventional loan, you have a certain bank or credit union underwrite the loan in house. This means that credit union or bank can create their own standards for what they need for the loan.
With a portfolio they take into account other factors beside just income. They will look at your education, how stable your employment is, the size of your down payment, your rental and credit history and so much more. Additionally, they might accept pay stubs instead of taxes to prove income. This is why a portfolio loan is such a great idea for many people.
3. Get A Cosigner
Another way to get into a house is to try and get a cosigner. This is when someone who has stable income can sign with you to help reduce the liability. This doesn't mean that the cosigner will be on the loan for the entire life of the loan. The goal is refinance the house once you can prove more income on your taxes. But this way you don't have to wait years to get into a house.
These are just three ways that self-employed people can get a loan for a house.