3 Things You Should Do to Successfully Apply for Mortgage if You’re A Small Business Owner
Small business and mortgage are like water and oil – they do not mix well. Well, this will be correct if you believe so, but in reality, there is not truth in it. Many people are still under the spell of the myth that you cannot qualify for a loan if you are self-employed, say a small business owner. This misnomer has discouraged many new entrepreneurs from getting mortgage because banks do not take their side. Some say that if you are self-employed you cannot have stable source of income. Although this can be true, this does not mean you can no longer qualify for mortgage.
The first thing you should do before applying for mortgage is to familiarize yourself with the mortgage rates offered by the financial institution you are intending to trust. You can ask the company to give you a detailed quote related to your mortgage application. By doing this, you will get a clue about the loan you will get. Alternatively, you can ask your bank or financial institution to give you advice on mortgage rates.
There are several ways you can do to escape the common notion that mortgage and small business do not go together well, and these include the following:
Apply for mortgage – This may seem a no-brainer but many small business owners are discouraged from doing this because they believe they cannot do so. The truth is that you can qualify for mortgage even if you are self-employed. In fact, according to Federal Housing Authority (FHA), banks and other financial organizations that offer FHA loans package provide a checklist of requirements and pieces of information regarding mortgage package. As it is, if you are a small business owner, you can apply for mortgage so long as you meet the requirements and learn all the information related to your application, and eventually get an approval for your loan.
Get assistance from your accountant – Your accountant will serve as your wingman in your mortgage application venture as he or she will help you provide all the documents that the bank or financial institution would need. If you are just starting with your small business, chances are, your income is relatively low compared to the one you are earning when you were still working as an employee. As it is, you may have some issues in your mortgage application as banks see this as a red flag. However, you can still get an approval with the help of your accountant. Have your accountant prepare a profit and loss statement, which will prove that the amount of income on the return is not synonymous to money that your business gets. It is advisable to do this quarterly in order to show to the bank that your business is capable of generating more income, which will help you get an approval for your mortgage application.
Fill out IRS form – As a small business owner applying for mortgage, your bank or financial institution may ask for your permission to get transcripts of your tax returns from the IRS. As it is, you would need to fill out IRS Form 4506-T, Request for Transcript of Tax Return. By doing this, you allow your lender to see your tax returns’ transcripts. Your bank will then ask the IRS rather than you to give it your transcripts; this is to make sure that it will get the accurate status of your finances.
If you are planning to apply for mortgage and afraid to do so because you are self-employed business owner, there is not need to fret because in reality you can qualify for loan. All you have to do is to play it by the book and to follow all the necessary procedures, and you are on your way to get an approval for your mortgage application.
ABOUT THE AUTHOR:
Daniel Watson is a journalist and publicist for Kanetix.ca, an innovative insurance quoting marketplace. Kanetix.ca offers great advice in Toronto on mortgage rates. You can connect with Daniel Watson on Google+.
