How can I get a mortgage as a small business owner?

Question

My partner and I are considering buying a home. We're both half-owners in our own small software company. Our business has been around for three years, has always been profitable and profits have more or less doubled each year since we started. We both have excellent credit and our combined income is enough to qualify us for the kind of place we want based on the 28/36 rule.

But I've been researching this and I've been reading that self-employed people can (understandably) have a harder time qualifying for a mortgage.

What can I do to boost the chances that I'll get a mortgage and a good interest rate, despite being self-employed? Do I need to have more liquid assets, a bigger downpayment - both?

BTW, I'm in the US.

Answer 1

Does your business have a loan or overdraft with a bank? If so that bank will be much more likely to offer you a personal mortgage if you can show them a solid business plan and your profits for each year.

Other than that make sure you have a perfect credit rating, use Experian to iron out any small things that might get in the way.

Answer 2

There should be no problem getting a mortgage from a bank with 3 years in business. They are going to use the average of the last 2 years of taxable profits to determine your income though. I think the key words here are taxable profits and this is where the problem typically comes in for most self employed folks. Many times self employed people will have soft losses and deductions that make their income seem lower than it really is (or unreported income).

It has nothing to do with your business plan, or your relationship with the bank unless it is a small community bank or credit union.