Home Ownership Guide for Entrepreneurs
IS IT POSSIBLE?
Purchasing your first home is a big step and an exciting time! Make sure you're saving money and paying down debt to increase your chances of getting a good interest rate. The more years of income you can demonstrate, the better your chances of obtaining a mortgage loan. If you don't already have one, start assembling your wealth team. Accountants, brokers, financial planners or advisors, and a real estate team are all excellent resources to have at your disposal and in your corner as you navigate this process. To secure a mortgage from a lender, you will need to show documentation as an entrepreneur. at least two years of business and personal tax returns, as well as any other income documentation that a lender may require to confirm your income Evidence of Your Assets and Liability
Key Points for Home Mortgages
As an entrepreneur, your steps to home ownership may look a little different than that of the average home owner. Here are a few key points to keep in mind followed by five steps that can be taken to help you achieve your goal of purchasing a home!
Yes, you can obtain a mortgage as an entrepreneur!
To secure a mortgage from a lender, you will need to show documentation as an entrepreneur.
Tax records that are up to date.
At least two years of business and personal tax returns, as well as any other income documentation that a lender may require to confirm your income
Evidence of Your Assets and Liability
Don't write off too much in your business; you'll need to show a reasonable amount of income.
The higher your credit score, the lower your interest rate!
An entrepreneur's process is identical to that of a W-2 employee. The distinction is in the proof of income.
STEP 1: SET UP YOUR LLC
First, make sure you have an LLC, S Corp, or C Corp in place at least two years before you intend to buy a home. What is the significance of this? Your credit score as a sole proprietor, owner without an LLC, is directly related to the score of your business. In essence, you have ONE credit score for both yourself and your company. Ideally, you should structure your corporation so that you have two separate credit scores, one for yourself and one for the business. Then, concentrate on making that business profitable so you can show desirable profit and loss statements when it comes time to secure your home loan.
STEP 2: MONITOR YOUR CREDIT SCORE
Second, make sure to monitor your credit score during the two years preceding your loan application. Clean up your credit, pay down your debts, and keep your credit score high for the next two years. In addition to your current P&Ls, it can be beneficial to show a lender your projected business profits for the next two or three years.
Pro Tip: There are lenders who work well with entrepreneurs and specialize in assisting these applicants. I have connections with a few real estate lenders and professionals who specialize in this area, and it can make or break your ability to obtain financing.
STEP 3: BUILD YOUR RESERVE FUNDS
Third, build up your reserve funds as you prepare to buy your first home. This is referred to as a wealth account, and it remains within your company rather than being used to pay yourself. You are putting this money aside without the tax ramifications of paying yourself first. The goal is to save enough for a down payment and closing costs while keeping proper tax records for at least two years prior to speaking with a lender about financing because you will be required to submit tax documents.
STEP 4: COLLECT TAX DOCUMENTS
Four, you are essentially submitting two years of tax documents for yourself and two years for your company, which is why it is critical to incorporate so that you have two separate credit scores. An entrepreneur's process is identical to that of a W-2 employee. The distinction is in the proof of income. You must submit a corporate tax return.
STEP 5: WATCH INCOME AND DEDUCTIONS
Five, an important tip is that you really have to watch the income and deductions that are being taken from your company. Take as many deductions as you can and work with a tax specialist for the best strategies. You can treat your company as a bank and take loans out against it as a way to pay yourself while conserving taxes.
HOME OWNERSHIP IS POSSIBLE
GUIDED BY TOP-TIER PROFESSIONALS FROM A-TO-Z
Have you been told as an entrepreneur that you can't own a home because no one will approve you for a mortgage loan? Fortunately, this is not the case! You can buy a home even if your only source of income is as an entrepreneur. The mortgage approval process is more time-consuming, requiring more paperwork and proof of income, but it is doable. Esther Nix and her sphere of Real Estate and Entrepreneur experts are here to assist you every step of the way! Learn more about purchasing as an entrepreneur by reaching out to me.
