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Financial Considerations For Buying A Home As An Entrepreneur

12 January 2017

Jesse Obrien

When you're an entrepreneur, you already know the importance of hard work and budgeting. If you're planning to buy your first home in the future, a number of financial considerations will make the process easier for you. It's important to keep these concepts in mind well before you begin looking for a home to buy, as they aren't things that you can accomplish overnight. Here are some things to think about before you buy a home as an entrepreneur.

Save As Much As You Can

While saving for a down payment may seem like advice that can benefit any person about to buy a home, this is especially important for entrepreneurs. When you work for yourself, it can often be challenging to secure a mortgage. Some lenders will be timid to help you because they feel that your standing as an entrepreneur means that your employment and income aren't as secure as working for a corporation, for example. The more money you can show to the lender as being saved for a down payment, the better chances of securing a mortgage you'll have. A large amount of money saved also shows that you're smart financially, which is something that the lender will want to see.

Keep Your Income Consistent

Lenders will occasionally be resistant to offer mortgages to entrepreneurs who have a shaky income history. For example, if you earned just $15,000 in your first year in business, had a good second year with $40,000, but struggled through a series of challenges in your third year and earned $22,500, this doesn't really provide a sturdy track record for a lender to consider. By comparison, someone who works for a company and has earned between $40,000 and $45,000 every year for the past four years has more of a consistent track record. Keeping your income consistent might be more easily said than done, but keeping this goal in mind will work in your favor.

Pay Back Your Loans First

If you took a loan to help start your business, you should plan to have it paid off entirely before you try to buy a home and secure a mortgage. Some lenders aren't in favor of giving mortgages to people who owe a significant amount of money in loans; they know that the person's income will be split between paying off the loan and trying to pay the mortgage, which could lead to financial struggles. By paying back all your loans first, you'll increase your ability of getting a mortgage.

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