Are you a business owner who’s thinking of buying your first home? Great idea. But did you know that most entrepreneurs find it hard to get approved for a mortgage? This usually happens when they make bad decisions that can affect your home loan application. Good news is, you can easily avoid making the same mistakes.
Here are the top six mistakes business owners needs to avoid when buying a house and applying for a mortgage.
When you’re an entrepreneur, it can be tricky to get approved for a home loan if you don’t declare your income accurately. Your lender will require to provide tax documents to verify your source of income. If you fail to show the necessary paperwork proving you have a stable income for at least two years, your chances of getting approved for a home loan decreases.
Nowadays, you can qualify for a home loan even if you can only afford the minimum down payment. However, what some business owners fail to realize is that you also need to save enough cash to cover for the closing costs. Talk to your lender and to read the mortgage terms and conditions thoroughly to anticipate the closing cost amount you need to prepare.
Good Read: What Are Closing Costs?
Just because you have a good business credit score already meant you’re eligible for a home loan. Your lender will check what your personal credit score is and how much of a good debt payer are you based on your credit history. Every mortgage loan type has its own minimum credit score requirement. For example, you need at least 580 FICO score to get approved for an FHA Loans Plano.
It is always a good idea to separate your personal and business finances for tax recording purposes. Create a separate account for both personal and business bank accounts. This way, you have proof of income to show to your lender during home loan application. Make sure to issue yourself a payslip and have a separate tax payment to avoid issues in the future.
Not all lenders offer the same services, have the same requirements and corresponding values. That being said, it is crucial that you don’t limit yourself with the first mortgage lender you come across with. You might miss a good mortgage deal, or worse, lose your chance of landing a mortgage approval.
Aside from the down payment, interest fees, closing fees, homeowners association, and mortgage insurance, there are other fees to consider before buying a house with or without a home loan. You also need to think about moving expenses, interior and exterior design, homeowners insurance, property taxes and repair and, among other costs. You’d be surprised once these costs add up and you can lose more money that you can afford if you fail to anticipate the true cost of home ownership.
Recommended Read: More Than a Mortgage: The Cost of Owning a Home