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I Own my Own Business, Why Can’t I Own my Own House?!

There’s a lot of perks of being the boss. You get to set your own hours and of course, there’s those irresistible write offs. Self-employed borrowers have always been the trickiest for us mortgage guys though. We come across these hard-working individuals with very successful businesses and as a result, a good chunk of money in the bank. So why so often do we find these people stuck in rentals? In short, the answer is write-offs. Business owners shell out a lot of money to sustain their businesses and the government gives you a chance to recoup some of that during tax season. And a good accountant can save you thousands of dollars in taxes. This unfortunately works against you when qualifying for a mortgage because the lender is only allowed to use income left over after all the business expenses, the NET income. And if you have an aggressive accountant, who was once your best friend, he or she is now your worst enemy, because the grand finale number of what you qualify for is extremely disappointing.

Self-employed borrower researching how they can get a mortgage

Here’s some key things to know as a business owner wanting to own their own house:

  1. You can add certain expenses back into the equation. For instance, you may claim depreciation on equipment and hardware. This deduction gets added back to into your net profit.
  2. Another expense that can be added back is the home office deduction or a car expense. If you use any part of your home or car to conduct business and you make regular payments from your business account, you may be able to exclude those monthly payments and add that amount back into your net profit.
  3. If all else fails, there are programs that are asset based rather than income based, and you could qualify for a loan by showing your bank statements instead of tax returns. These for some seem less desirable but are available if need be.

Talk to your accountant and talk to an experienced lender. Work together and come up with a plan. There are plenty of programs in place for hardworking people that are deserving of a home to call their own.