Getting a Home Loan as a Home-Based Business Owner
Building a home-based business is a fantastic way to take control of your career and live life on your own terms. However, it can make the moving process a little bit more complicated.Although home-based business owners are perfectly capable of getting a mortgage, you may need to take more steps to find the right offer for your family, life, and business. That’s why Preneurgrowth has created this guide to give you a sense for what you can expect during the house-hunting process when you own your own business.
The first step in any house-buying journey should be researching your local housing market, notes Poll fish. Taking a look at what’s available right now gives you a good sense for what kind of price point you can expect for the type of home you want. This is your opportunity to figure out what neighborhoods are affordable, what sort of homes are selling (and at what price point),and to generally set a rough budget for your house search.If you struggle to find the right home to buy in your area, you may want to consider what homes are available for rent.
Though not ideal, renting a home can get you into the area you’d like to
be while you continue your search for a home to buy. You can use online search tools to narrow down your search by location and features to find a home to rent that meets your needs.
Loan Application Prep
As we said, there’s nothing stopping business owners from getting a home loan. However, the process can be a little bit more complicated. This is because banks need to have solid proof that you’re a good investment before they’ll be comfortable lending you money for your future home.Rocket Mortgage points out that self-employed individuals often have to go above and beyond in order to make a convincing argument on this front.For example, you’ll likely need to have at least two years worth of steady (or better, increasing)self-employment income to establish your loan candidacy.
If your business is newer than this,you may be limited when it comes to options for your home loan. Alternatively, if you’re buying a home with a partner, you may only be able to use your partner’s income to qualify for loan options. You may also need a higher down payment than your traditionally employed peers.
Establishing Financial Boundaries
If you run your business as a sole proprietorship, now may be a good time to consider whether forming a limited liability company (LLC) makes sense for you. By forming a limited liability company for your business, you’re creating a layer of legal separation between your business assets and your personal assets. This is important when buying new property because, without it, your home could be in danger in the event of a lawsuit or other major business debt.
However, blending personal and professional finances can negate the effects of an LLC. Be very careful about tracking all of your professional expenses, and never use business funds for personal reasons (or vice-versa). When you do this, you open that legal boundary and put your personal assets back into the picture.
Consider talking to a financial advisor before making any business finance decision that could conceivably blur this boundary. They can give you specific advice that will help you navigate such situations as they arise.
Running Your Business
It never hurts to take a moment to brush up on the fundamentals of running a home-based business, since technology has a way of constantly changing the landscape. Assuming you work with a team, you’re probably already used to communicating with them via email and video chats. There are other tools that can assist you, though. For instance, sending lots of different,bulky PDFs via email can quickly become confusing, but you can avoid this by using a free online tool to merge PDFs into one file.
Additionally, if you haven’t already dedicated one room to being your home office, you should.There are a lot of moving parts that go with running your own business and a home office will help you focus — not to mention separate your business and personal lives. That being said,
your home office doesn’t have to be stuffy. In fact, since you’re going to be spending so much time there, you might as well enjoy it! Use natural light whenever possible;natural light is a great source of vitamin D, which is good for your help and will keep you in a better mood. They also suggest paying attention to the color scheme — you want something that will help you feel energized, not put you to sleep — and investing in some ergonomic furniture.
Parents who work from home also need to set firm boundaries with their children and stick to them. Often, that’s easier said than done. However, the goal is to work out a reasonable compromise so that children get the care and guidance they need, but you still have time and space to work without interruptions. Also, installing nanny cams allows you to keep an eye on your little ones without interrupting your work, as well.From securing your new home loan to running your business, you have a lot on your mind.However, you also have a lot of resources at your command.
Although you may need to take extra steps to prove you’re ready for a home loan, home-based business owners can find the funding they need to get the home of their dreams. We hope this article helps to demystify the process and get you on the right track for getting your home loan! For an entrepreneur’s help in bettering your own business, reach out to Preneurgrowth today!
Written By Susan Peterson