There are many advantages to being self-employed, but one disadvantage is that it is much more difficult to prove your income to financial institutions. It gets especially complicated when your income is much less on paper than it actually is— especially when you factor in the deductions made from business expenses. Recent rule changes have made it much more difficult for self-employed workers to qualify for a loan, but if you are self employed, there are ways to increase your chances of successfully securing a loan.
Have A Good Credit Score
Although it is not the only requirement for securing a mortgage, it is still critical. If you know your credit score is low, try to improve your score before approaching the bank, because it is one of the first things they will look at.
Keep Your Business Books
Keep track of your financial records. Practise good bookkeeping and keep your receipts handy. The lender will want to see the progress of the business over a period of time and ascertain its value. It is also important to show regular bank statements to show your income.
Be Prepared To Discuss Your Business
The lender will want to know the nature of your business—especially the financial aspect. Know the business’ income and expenses and how much it is worth or projected to be worth.
Write Off Fewer Expenses
While writing off as many expenses as possible has been the traditional way for business owners to lower their taxes, they may also end up qualifying for a smaller loan. Before you apply for a mortgage, reduce the number of expenses you write off. You may end up paying more in taxes but you will find it easier to secure a mortgage at the amount you want.
Pay Yourself A Salary
It might be easier to treat yourself as an employee in your own business and simply pay yourself a salary. The banks may be more inclined to treat you as a salaried employee rather than a business owner.
Being self-employed is quite rewarding, and with a little planning and forethought, it doesn’t have to inhibit you from accessing a mortgage. The more information you can provide to the lender about the finances and operations of your business, the easier it is to secure a mortgage that is right for you. At Northwood Mortgage™, our specialists can help you as a self-employed person to secure the best available mortgages. Give us a call today and book a free consultation.