How To Buy A Bigger Home When You’re A Self-Employed Home-Based Business Owner
Anytime you buy a house, the process can be long and challenging. As an entrepreneur, you might even be at a disadvantage. Traditionally, banks believe that business owners are a bit more of a risk than those with a predictable 9-to-5 income. But, when you own a growing business and also work from home, a new house might be exactly what you need to continue to thrive. Here are six tips to help you handle the hurdles.
Evaluate your cash flow.
Any time you make a large financial decision, it’s a smart step to know how much cash you have coming and going. You can use AFI Group’s cash flow calculator to figure out what you have left at the end of each month. Use this number to help you determine what a comfortable mortgage payment is according to your budget.
Know the steps to buying a home.
Your monthly comfort zone isn’t the only thing that affects how much house you can actually afford. Redfin explains that you can use a mortgage calculator for this. You also want to get familiar with the home-buying process if you’ve rented up until this point. A good rule of thumb is that, at minimum, you should check your credit report and get pre-approved, find a local realtor to help you, and spend some time looking at the types of homes available in your price range.
Eliminate debt and prepare for a larger down payment.
As a self-employed individual, your income can, and likely will, fluctuate. For this reason, it makes sense to prioritize paying off your outstanding debts. You may need to find a debt management solutions provider, preferably one that offers multiple options. What you ultimately choose to do about your debt depends on your ability to repay outstanding balances as well as your employment status. While this might delay your ability to buy a home, not having a monthly credit card or loan payment will give you a more fluid income.
Collect your records.
Buying a house is a business transaction just like any other. And that means paperwork — and lots of it. You will most likely be required to provide 60 days worth of bank statements, debt information, and ownership papers of any other real property you own. Your banker may also ask to see your total assets, including savings accounts and stocks. Collect your documents early so that you are better prepared when you’re ready to apply for a mortgage. Unlike the process for a traditional employee, your bank’s underwriters may also ask to see a profit and loss statement, which Gusto explains is simply a financial report documenting your total income and business expenses.
Confirm you can work from your new home.
Local building code regulations vary from state to state and county to county. Just because you haven’t run into any problems working from home in your current house or apartment doesn’t mean that it will be allowed in your new neighborhood. Contact your local city administrator’s office to ask about rules and regulations. And, keep in mind, many homeowner associations strictly forbid home-based businesses.
Buy the most maintenance-free home as possible.
Finally, buy a turnkey property that won’t require a great deal of your time. The last thing you need when you’re trying to run a business is a house that constantly pulls you from the office.
Buying a home is an entrepreneur or self-employed individual is a process that can take up to two months. But, you can expedite your home purchase by being as prepared as possible. So pay off debts, collect your documents, and get ready to start the next chapter of your career.
Advanced Financial Independence Group can help you live a fit financial life. From goal-setting to legacy planning, our experts are your personal portal to the tools you need to live the life you’ve always dreamed of.