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  • self-employed question

    Now that I have my own business I was wondering if anyone could tell me how much being self employed affected their ability to get a mortgage. We really need to move and I am working on cleaning up our credit so that we can do just that, but I know that we'll never be able to get a decent house with just my husbands income listed on the loan. I'm still part time but doing pretty well and now have my employee who is still growing her clientele. I know that when I filed my taxes for 2008 I hadn't hired her yet and was still pretty new. I still haven't filed my 2009 taxes yet either, but I'm thinking that when the time comes to apply for a mortgage the lender would want to look at my tax returns??? When we bought the house we are in now it was solely on my income and credit. We wanted a house where we could afford it on one income so I could be at home with the kids. Soon both kids will be in school and I need to get them into a better school district. I'm just wondering what, if anything, I should be prepared for when applying for a mortgage now that I am self employed. Thanks!
    What a caterpillar considers the end of his world, we call a butterfly.

  • #2
    Self Employment should not really be an issue as long as you can prove you have a viable business and an income appropriate for what you are buying. They will want to see you tax return, your business tax return, etc...

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    • #3
      Do you have financial statements?

      If so, that would probably help, too.

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      • #4
        Yep they will definitely want to see your tax returns. I bought a (second) house last February. I hadn't yet been in business two years, so they needed for me to have my taxes completed and filed before they would approve the loan. I make much more $$ than my husband does, but he has awesome insurance, so it evens out. It was such a pain in the butt. We needed to prove that we made enough income to handle both mortgage loans, even though we had a tenant all ready to move into the house we were moving out of. It didn't matter because they couldn't count the rental income as income, even though we had to supply a lease to them as part of the application process. It was such a tedious process, I honestly thought at the last minute they were going to yank the mortgage away from us and we would not be able to get our perfect house. As soon as we closed it was such a relief!

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        • #5
          I think you have to have the business for at least 2 years before a bank will even think about lending money. At least that is what I was told when I was thinking about buying a house. I had just started working as an IC and they told me I had to wait 2 years and I had to show them all my tax info. They needed to see how much income I made, and how much I claimed...it was pretty involved. I don't think that being self employed will make it any harder for you to get a loan, it's just a little bit more involved.
          This is just the experience I had...I'm not sure if this is true with all lenders.

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          • #6
            To be perfectly honest, if I sit and think too long about where we live and our house, I will burst into tears. I hate it with a passion. I just want to do whatever I can to get out of here as fast as possible and I was worried that being self employed was going to hurt us. I see these commercials all the time for special financing on cars and it will say stuff like "Bad credit? No Credit? Self employerd? No Problem" and I never really understood why being self employed would be a bad thing. I've got to keep working on building my employees clientele as well and maybe in a year or so we can start looking at trying to buy another house.
            What a caterpillar considers the end of his world, we call a butterfly.

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            • #7
              We just bought a second home and it was VERY trying. Here's a few things that they needed. They will ask you to sign papers giving them permission to look at your tax returns directly from the IRS. They want a list of all retirement accounts, savings accounts, debts, child care costs, child support, alimony. You will need atleast 2yrs..maybe more. Your income is based on your taxable income, so if you have had alot of business expenses, it will make a difference. They asked where and if I advertised..and checked both my website and yellow page ad. They are looking for things that say you intend to be sticking around. Your credit has to be steller..and I mean high 700's and up. You also have to consider the market when selling your home, which would also include closing costs. If you don't sell your home first, you will then have to qualify for two mortages. Also, your debt to income ration has to be somewhere under 43%. You also need quite a bit of cash to put down..atleast 20% if you are using a conventional loan. This is a great time to buy a house, but it isn't easy.

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              • #8
                I'm in Canada but I know when my boyfriend and I split up and I tried to get the house in my name, they shut me down immediately since I didn't have two years history with the business. Being self employed and home based really takes its toll on my income "on paper" since I claim so much. My 09 tax return looks like I'm one breath away to living in a cardboard box! But really, I made a decent amount of money.

                Anyways, if you both have an income and you got your house on your income alone then Im sure you'll have no problems upgrading...?? fingers crossed for you!

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                • #9
                  Wow, have things changed that much? We bought our house 7 years ago and put 5% down and needed a credit score over 600 to get the FHA loan. Since the loan in solely in my name I was hoping we could apply for another FHA loan under my husbands name, but have no idea if that is possible if I am on the loan. All I want is a house in a nice neighborhood where I don't have to be scared to let my kids play outside and where they can attend a good school. Sometimes it gets so discouraging when hubby and I both work so hard and yet feel like we aren't gaining any ground, but I am determined to make it happen. our neighborhood has gone downhill so much since we bought our home. most of the houses now on my street have become rental properties and there are loose dogs, mostly pitbulls that roam around. I'm not singling out pit bulls, I'd be worried about any decent size dog roaming around, it just seems what most people have here are pits. My car has been broken into twice, vandalized (they spray painted my white Honda Odyssey with red paint), kids walking around spouting profanity at the top of their lungs, walking the streets at all hours. We HAVE to get out of here.
                  What a caterpillar considers the end of his world, we call a butterfly.

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                  • #10
                    [QUOTE= You also need quite a bit of cash to put down..atleast 20% if you are using a conventional loan. This is a great time to buy a house, but it isn't easy.[/QUOTE]


                    We were able to get an FHA mortgage with 3% down. The first mortgage on my other house is not FHA, so we were able to do that

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                    • #11
                      If your neighborhood is that dangerous, then I would consider selling it and finding a home to rent. It may be a problem to sell, maybe not, talk to a realtor who works your area. They know what you will need to do...and somethimes that means you have to bring money to the table to sell. You wouldn't have a problem finding a nice rental home. Alot of people are underwater and chosing to rent their home rather than sell until the market turns.

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                      • #12
                        Originally posted by Brahmadog View Post
                        We were able to get an FHA mortgage with 3% down. The first mortgage on my other house is not FHA, so we were able to do that
                        Since my husband is a retired vet, we were able to use the VA. They allow you to wrap their fees into the total mortage and the sellers paid closing costs so we didn't have to come out of pocket with alot of cash.

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                        • #13
                          Unfortunately, it's pretty much impossible to find a nice place to rent that will allow pets and none will allow 3 dogs and 2 cats and I'm not willing to part with any of them, which I'm sure everyone here understands. My husband is dead set against renting and to be honest, our mortgage payment is a lot cheaper than any rent on a decent place would be. We bought this house as a starter, to build equity and had planned to sell in 5 years thinking our first child would be about 2 at that time. Well, 2 months after we closed I found out I was pregnant so all of those plans went out the window. Our immediate neighbors are fabulous, really nice people, all home owners. It's just most of the rest of the street. When the economy tanks a lot of homes were sold and bought as rental properties and most are absentee landlords who don't really care about the properties.
                          What a caterpillar considers the end of his world, we call a butterfly.

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                          • #14
                            Originally posted by windfall4 View Post
                            I think you have to have the business for at least 2 years before a bank will even think about lending money. At least that is what I was told when I was thinking about buying a house. I had just started working as an IC and they told me I had to wait 2 years and I had to show them all my tax info. They needed to see how much income I made, and how much I claimed...it was pretty involved. I don't think that being self employed will make it any harder for you to get a loan, it's just a little bit more involved.
                            This is just the experience I had...I'm not sure if this is true with all lenders.
                            When I first opened my shop, we were in the process of buying some vacant land. (which we later sold because we had the neighbors from hell, but that's another story) I was told, at the time, that I had to be in business for 2 years before the bank would even look at my business income to consider a loan. Not that it mattered.... my husbands income was good enough for them. Just sayin

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                            • #15
                              It is hard, not to be discouraging but my hubby makes great money, I have been "self employed" since 1997 and make a very decent income, we have great credit and when we refinanced our home a few years back it became less of a headache to not have me on the loan at all. Although I am on the title- I had no issue when I purchased my personal car solely in my name but the house was different story (and we had TONS of equity in our home).

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