Applying for a mortgage means your financial situation is under close scrutiny and that applies even more so when you're self-employed. But that certainly doesn't mean that you can't get a mortgage or that you'll never be able to buy Beavercreek homes for sale. Many self-employed people successfully buy houses every year. But you may encounter a few more stumbling blocks along the way. So what can you do to make the process go as smoothly as possible? These tips can help.

1. Keep good records and have the right documentation available. Lenders need to assess your ability to pay back the loan before you get approved. It can be a little more difficult to prove you have that ability when you're self-employed. You don't have the paper trail of pay stubs and W-2s other borrowers can rely on. You will need to produce more verification of your consistent income. In general, lenders will want at least two years of tax returns, a 1099 form, and a profit and loss statement if you are a business owner. You will also need monthly or quarterly statements from your bank and investment accounts.
   
   
2. Don't combine business and personal expenses. Keep separate bank and credit card accounts for your business. This makes it easier to prove whether the business is operating with a profit or a loss and that it is a viable business that is a steady source of income. Additionally, paying business expenses out of your personal accounts can impact your credit score. If you've missed payments or your business carries debt, it can affect your debt-to-income ratio, credit utilization ratio, and show a less-than-perfect repayment history, all of which impacts your overall score.
   
   
3. Meet with a lender as early in the process as possible. Anyone planning on applying for a mortgage needs to get their credit report and look at their financial situation beforehand. This is especially important if you're self-employed. A lender can help you determine a plan to give you the best chance of getting approved for the loan. Knowing ahead of time if you'll need to earn a little more money in the near future, come up with a bigger down payment, or improve your debt-to-income ratio or credit score will keep you from being unpleasantly surprised.
   
   
4. Know that lenders will use your net income. When you get W-2s, lenders use your gross income (before taxes) to meet their income requirements. When you're self-employed, lenders use your net income—the amount left after taxes and other deductions have been taken out. So while deducting business expenses will save you money at tax time, to a lender, it lowers your income. Using that lower-income amount increases your debt-to-income ratio. Keep that in mind when you're planning. For traditional mortgages, lenders generally want a debt-to-income ratio of 28% or less.
   
   
5. Lenders will also calculate an average income. Some fluctuation in income generally happens when you're self-employed. Some businesses have seasonal increases, or you may work less one month if you've taken a vacation. Lenders want to make sure you consistently make enough to make your payment, so an average can help account for those variations. They'll usually use the last two years, although more or less may be required.

Although getting a mortgage when you're self-employed might require a little more work on your part, it certainly isn't impossible! And our REALTORS® can help you get into the right home for you and your family. Contact Wright-Patt Realty today for more information.