Getting a home loan can feel incredibly difficult, especially if you are self-employed. Self-employed individuals have a harder time proving their income, which is why it can take a long time, and cost them more to get into a house. Luckily, there are some things that you can do to get into a home quicker. Here are some things you should know.
1. Put Down A Bigger Down Payment
One of the best ways to increase your chances of getting a home loan is to put down a bigger down payment on the house. This is helpful for a couple of reasons. The first is that you aren't as much of a risk to the bank if you have a bigger down payment. If they already have 20% on the house, then even if you need to foreclose on the home, they have all of that money, plus what they get from selling it, so they don't lose as much money on the home.
In addition, when you put down a bigger down payment, it will cause the actual amount that you need to borrow to be less. The smaller the loan, the more likely you are to get approved because you don't have to prove as much income. Take a $400,000 house: if you only borrow a fraction of that, it will make you a better candidate.
2. Don't Deduct As Much On Your Taxes
When you file your taxes be careful about how many deductions you take the year before purchasing a house. Self-employed individuals can take many deductions because they might work from home, they own their own equipment, they pay rent on a building, and so forth. The problem is that mortgage lenders won't take your gross income, they take you AGI, which is adjusted for your deductions. The more deductions you take the lower your income will look.
3. Consider A Co-Signer
Lastly, if you still can't get the loan, consider getting a co-signer to buy the house with you. This doesn't have to be a long-term thing. It is much easier to refinance the house and get the co-signer removed so it is in your name only rather than try to get the house on your own the first time. If you have someone willing to co-sign you should consider it.
By understanding these things you can improve your chances of getting approved for a home loan.
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