"The borrower may be fixed on one program," says Dena Kwaschyn, underwriting executive at Bank of America Home Loans. "But based on how long they've held the business, the maturity of profile and their asset situation, there may be a product that's more amenable."
Consider taking a tax hitOne of the advantages of self-employment is the wide range of things you can deduct from your taxes. However, driving down taxable income with those deductions may make it more difficult to secure a mortgage.
"If you earn, say, $100,000 and write off a lot of expenses throughout the year to drive down gross taxable income, that plays negatively into how a lender looks at your overall gross income of that year," Findlay says. "Lenders look at taxable, reportable income, so write-offs work against you."
It's a painful step -- and often an expensive one -- but you can often refile for those "forgotten" expenses after securing the loan. Check with an accountant before doing so, however.
A beefy bank account helpsBeing liquid is never a bad thing when you're applying for a mortgage, but it's even more crucial when you're running a business. Self-employment generally causes income levels to fluctuate from year to year, and banks want to be sure you can cover the bills in lean times.
Having a year's worth of mortgage payments liquid and in reserve in a savings account or other savings vehicle can boost your application's prospects. It may even be more important than a beefy down payment, which generally only helps you get a lower rate.
Consider a co-signerDon't yet have two years of records under your wing, but still ready to buy? A qualified co-signer can help secure a loan.
However, make sure the prospective co-signer has his or her own finances in tip-top condition.
Borrowers who have less than two years of records "will need to have a very strong co-applicant on the transaction," Kwaschyn says.
"Typically, we look more favorably on someone who will occupy that home with them," Kwaschyn says.
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