How to Buy a Home When You Are Self Employed

I have been self employed for eight years now. I work from home and have enjoyed every minute of it up until the time I started to want to buy our home. We had been renting the house we lived in for five years and after a years of asking, our landlord was willing to sell to us! It was like a dream come true that we could possibly own our home. But we still had to figure out how to get approved for a home loan.

Getting a home loan when you're self employed isn't impossible but it's harder than if you had a 9-5 job. When you're self employed, they don't look at your gross income like if you had a normal job. They go by your net income which is your income after every single deduction. So if you take a lot of deductions every year, chances are you might not qualify.

That's what happened to us for the first two years of trying to get a home loan. We had taken too many self employment deductions in our taxes so it brought our net income down too low. Of course we could still afford the house payment but when it came to the bottom line, it looked like we couldn't. So we had to wait two more years.

When you're self employed, a mortgage company will look at the past two years of tax returns. Sometimes even three. That way they can see if your income is steady or if it's declining.

It wasn't until early in 2018 did I try to apply again after waiting and I was approved for our home loan! My income had gotten higher and it showed I had a steady income throughout the year. It was finally official in late June 2018 when we signed our mortgage papers. We were officially homeowners!

If you're wanting to buy a home and you're self employed too, don't give up! Here are some tips that we used that might be able to work for you as well:

1. Plan ahead. It's harder to get a loan when you're self employed so you will need to have a good track of your taxes for the past two years. If you had low income in the past year, you will need to wait until the next year so you can show it's increasing.
2. Take less deductions. Yes, I know this one can be so hard but it works. If you take less deductions, you will have a higher net income and the higher it is, the more banks will be willing to give you a home loan. If you need help with this, you can look into switching accountants to help you.
3. Shop Around. There are a lot of places that will work with people who are self employed for home loans. Shopping around will help you be able to find some promising companies to see what they can offer your situation. Call them on the phone and explain your situation first though before doing an entire application. That way it doesn't hurt your credit score.