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Self-employed and Ready to Buy a Home?!

December 3, 2018

Raise your hand if your self-employed? If you work for yourself, your taxes and home buying process will be slightly different from those who are on a W2 job. Why? Because your income is structured differently. 

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About two years ago, Colorado lending changed the rule for self-employed individuals. You now need to show at least two years of tax returns, which is a change from one year that was previously required before. What does this mean? You need to show the bank that your business is consistent enough to get pre-approved for the loan amount you want. The more deductions you take, the less income you show. When you're buying a home, you need the opposite, you need to show as much income as you can! 

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Here is the tricky part. As any self-employed individual knows (yours truly included), we want to write off EVERYTHING we can  because that is the beauty of being a small business owner. The snag is that you also need to show the bank that you make enough money to support the loan you’re getting. 

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When I purchased my house, I had to hold back on all my deductions because I needed to show the absolute most amount of income I could, to qualify for our loan. So, if you're self-employed and thinking about buying a home in the future, come up with a game plan so you’re not shocked when it comes time to chat with a lender! 

 

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