Post # 1
Helllo, my SO and I are both self-employed (own a business together). We have been in business for (almost) 2 years. We REALLY want to buy a house in February of 2014 when our lease it up (3 years in business at that point). The problem is our accountant basically said it was never going to happen that soon and it would be YEARS before we are getting into a house. We both have been working on improving our credit scores by paying off all our credit cards (they will all be paid off well before Feb. 2014). However, our student loans are MAJOR (almost $400,000) combined which will obviously not be paid off. We are trying to save like crazy to have a decent downpayment when the time comes. We will also most likely be having a wedding (small) around the same time. This is all so stressful. Is anyone in a similar situation or have any advice on how to increase your chances of getting a mortgage and getting into a decent house? Thanks!
Post # 3
@Lily_of_the_valley: I am in a similiar situation so I’m not sure how it’ll work for us as well. We own a business together. We want a loan for 300,000.00 to BUILD a house not BUY a house which I think is going to be very tricky. We already have the land (free) so yeah. We do not have high student loans though.
Is your business successful? Do you mind saying how much you bring in? profits for your first year vs second year, projections for third year?
Post # 4
TO @Lily_of_the_valley:, Been there… Done that.
I won’t kid you… getting a mortgage (or even a regular bank loan) when you are Self-Employed is TONS harder than getting one when you are a salaried worker (definitely NOT FAIR, and kind of stupid when you think that a self-employed person is usually more invested emmotionally in their career than someone who works for someone else… and could quite easily get laid off tomorrow)
Your Student Loans are going to be a HUGE LIABILITY in this process. So unless you figure out how to eliminate them by 2014… I have to say I agree with your Accountant, not gonna happen anytime soon.
Besides an Accountant, when the time comes to buy a house, I suggest that you look at both Mortgages offered by the Banks, as well as those financed thru Mortgage Brokers.
Another option is to find a house, where the Seller is willing to be the Mortage Holder (but that is rare)
Sorry, I don’t have any better news for you…
Post # 5
@S2013: we do fairly well but it is a double edged sword because our accountant (who I am not sure is hurting or helping us) makes sure we have a ton of deductions and write offs so that we aren’t paying a boat load in taxes, so he is basically saying we don’t make much. On the other hand if he reports what we TRULY make without deductions then we will have to pay a ton in small business taxes which I think is a silly choice to do. We are growing year to year but not exponentially. The economy is tough (obviously) but we are in no danger of going belly-up anytime soon.
Post # 6
TO @Lily_of_the_valley: I don’t know how reliable this wesbite is… I just GOOGLED – Self-Employed and Getting a Mortgage – and it came up as a possibility…
BUT it does say a lot of what your Accountant said… with some tips.
You might want to do some similar GOOGLING on your own, to see what else you come up with.
And as always in life when it comes to BIG Decisions, I would think it would be best to get more than one “qualified” opinion / shop around for advice.
Hope this helps,
Post # 7
thanks for the input, I wish they could just give me the house and trust that I’m good for it
Post # 8
Maybe try talking to the bank and see if they have any suggestions? Maybe if you pay yourself a regular wage they will see that as steady income over a long period of time? And pay off the loans as much as possible.
Post # 9
What saves you more money? years of crazy deductions/lower reported income but renting, or 2+ years of reporting your actual income, losing the deductions, but having a shot at a house? Sit down and do the math. What are your monthly loan payments? Your debt + mortgage payments can’t be above 35% of your income, (or thereabouts) for a bank to approve the amount. You also need reserves, usually 6+ months, to show you can cover the mortgage. You’re looking at minimum 2 years of being able to show the elevated income amount though – they may even want to see 3+ for a self-employed person.
Post # 10
Could you get someone to co-sign for you? (Parents, grandparents, sibling, etc?)
Sadly, since so many people have had homes go into foreclosure, the banks have really cracked down on the process.
When we bought our house, we had good income, no debt, good jobs, etc….they freaked out because we had no credit! We didn’t have bad credit, just no credit. We had been living within our means and had never borrowed money. Now we have bought a few things on payment plans just to build our credit.
I recommend going to a bank and talking to a mortgage originator. That is what we did and it was immensely helpful.
Also, make sure you are documenting all tax related things correctly. You said you are working with an accountant, so I’m sure you’ve got that more than covered! I only say that because I know some friends who have a landscaping business and often get paid in cash, etc…if you don’t document the income correctly, it really hurts your chances.