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Getting a Mortgage When You're Self-Employed: 5 Things You Should Know

Confident woman with arms crossed

It’s great to be your own boss! That is until you need to convince someone to give you a loan. But with a good plan and support from your loan officer, you’ll find that buying a home is one more American dream you can achieve.


Here are 5 things you can do now to get mortgage-ready:

  1. Put in your time.
    Most self-employed people work at their business for a couple of years before applying for a home loan. Doing this will help you build a longer history of tax and banking documents so you’ll have sufficient proof that you can afford (and keep up with) your mortgage payments. 
  2. Pay down your debt.
    In the meantime, try to pay down any other debt that you have, both personally and in your business. This will raise your credit score; the number lenders use to decide how much of a risk it is to lend you money. (Credit scores range from 300-850, and the higher, the better!) Having a high credit score makes it easier to get a loan, and you can often borrow money at lower interest rates, which will save you thousands of dollars over the life of the loan.   

    Download our Free Credit Guide
  3. Set some money aside. 
    If you can, continue to save up for a down payment on your home. The more you can pay up front, the less you will have to borrow. That makes you more attractive to lenders, and it’ll save you money in the long run.
  4. Talk to your lender.
    You don’t have to wait until your credit score is over 700, or you have a 20% down payment saved up. In fact, one of our experienced loan officers can help you figure out when you’ll be ready to buy, and it may be sooner than you think! As you get closer to that date, they can also explain the differences between different mortgages and help you decide which one is best for you. They will also make sure you understand what documents you’ll need to prove your income.
  5. Get organized.
    If you’re running your own business, you probably already have all of your accounts and financial records organized. But since you’ll need to submit some extra information, you may want to create a new folder where you keep copies of the documents your lender will want to see. We’ll go over what you need in the next section.


What information will you need?

Plan to keep records of the following documents so you can share them with your lender when you apply for your loan:

  • Your 1040 tax form from the past two years (including the Schedule C for your business and the Schedule K1 if you have a business partnership or S corporation)
  • A Profit & Loss statement for every month since the last time you filed taxes, covering receipts up to five days before you close on your loan
  • Your personal and business bank statements from the past three months
  • A complete list of your debts and monthly payments (home and office rental payments, auto loans, credit cards, alimony or child support, etc.), and a record of which ones are paid by your business
  • A list of any other assets you own (savings, stock, etc.)
  • Additional documents for your spouse, partner, or anyone else who will be cosigning the loan


You may be closer than you think


You work for yourself! You’ve already shown that you have the skills and ambition to go after what you want. And at Amerifirst, we know those same skills come in handy when you’re buying a house! Talk to us, and we’ll help you work towards your next goal of becoming a homeowner. 


Read our blog: Down Payment Assistance: How to get help buying your first home


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5 Reasons Not to Skip Your Home Inspection

You found a house you love—hooray! But with lots of other buyers breathing down your neck, you feel like you need to act fast. To make your offer more attractive to the seller, you might be tempted to skip your home inspection, but here are five good reasons not to! 1.) Not all problems are obvious. It’s easy to spot issues like a crack in the sink or a broken light fixture. But do you know how to recognize foundation problems, termite infestations, outdated wiring, or sewer system problems? Trained home inspectors do and taking the time to have them go over the entire property before you sign the papers can prevent you from buying a headache instead of a home. BOTTOM LINE: The great thing about an inspection is that if you see major problems you’re unwilling to take on, you can change your mind and walk away. 2.) You may not be able to afford the repairs. If you’re like many new homeowners, you may not have much set aside to pay for needed repairs after saving up for your down payment and closing costs. While you may not mind waiting a bit to repaint or update appliances, waiting on problems like leaky roofs, broken plumbing, or infestations will only make them worse, and some issues, like broken furnaces, may need to be repaired right away. BOTTON LINE: You don’t want to go deep into debt to keep your home safe and comfortable. Instead, it’s worth negotiating with the seller to pay for repairs. If they refuse, you can simply walk away. 3. Some problems can make it harder to insure the home. Getting home insurance is essential because lenders need to see an insurance policy before you can close on your home—and of course, you’ll want to have your home protected in case anything goes wrong. However, some companies may decide that your home’s older electrical systems, plumbing, or building materials make it too risky to insure. BOTTON LINE: If essential updates are needed, the only choices are to ask the seller to pay for them, pay for them yourself if you can afford it, or walk away from the deal. 4. Serious issues can affect the resale value of the home. Your home is probably the biggest investment you will ever make. However, if it has major problems, instead of building your wealth, it could turn into a lousy investment that threatens your financial well-being. BOTTON LINE: While a home inspection typically costs a few hundred dollars, it’s an excellent investment in your peace of mind and financial health. 5. Some problems can threaten your family’s health or even your life. This sounds scary, but it’s no exaggeration. Issues like lead paint, black mold, radon (an odorless radioactive gas), or carbon monoxide leaks can cause serious and sometimes fatal health problems. BOTTON LINE: These issues are also easy to miss without a professional home inspection, and it’s simply not worth taking the risk. While it’s not easy to compete with other buyers who are bidding for the house you want, home inspections are one area where you don’t want to cut corners. To protect your physical, financial, and mental health, there’s no substitute for a professional home inspection.

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Let's Talk FHA Loans

  If apartment living is getting old, or you've outgrown your parents' basement and house rules, you may be thinking about buying your own place. For this reason, you may be interested in learning about home loans that offer low and no-down payment options and have flexible lending requirements. One of these is the FHA loan. Let's take a closer look. 


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