From personal experience and from what I have heard from others, it can be a pain to get a mortgage as a self-employed person. My understanding is that you usually need to provide a longer history of income and show that income on tax returns. I actually have some friends who were netting around $1m+ in 1099 income (and had been doing so for years) and it took a lot of time, annoyance, and back and forth for them to qualify for their $2m home. (Which is absurd because they had enough liquid assets to write a check to buy the home outright if they wanted.)
I own a business, with 10 employees. We are a software company and we are organized as a c-corporation of which I own 100%.
I pay myself a normal w2 salary and over the last few years have kept that salary intentionally low in order to invest that money back into the business (also to take advantage of some of the fringe benefits tax savings available to c-corps like health coverage). But I have a family now and we are starting to prepare to buy a home.
My question is, do I really have to declare myself as self-employed? Is there a hard and fast definition for self-employed? Is anyone who owns more than 50% of their company really considered self employed?
I will need to raise my salary substantially to qualify for a home loan in our area as we live in a rather expensive area (probably will need to raise it from about $100k to $200k). The business can afford the salary increase, but I'm wondering if I am really going to have to pay myself for 2 years before being able to qualify for a loan. We plan to pay about 20% down and have no debt.
Do banks specifically ask if you own the company that pays you? Or will my pay stubs be enough for them? Is there anything else I should watch out for?
Submitted October 28, 2018 at 04:25AM by apennypacker https://ift.tt/2PVG3ZY
