Getting a mortgage is a real financial feat, especially with the stringent mortgage lending criteria that borrowers have to meet these days. But securing a home loan as a self-employed entrepreneur is even tougher.

Lenders usually request the typical documents along with loan applications, such as pay stubs, employment letters, and tax receipts. But people who run their own businesses typically don’t have the same type of income information that salaried individuals do. There are no pay stubs from their employers to prove their income.

Further, each year could bring in different revenues, which can make things even more difficult to determine whether or not the borrower will be able to keep up with mortgage payments throughout the years. And if the business is less than a couple of years old, getting a mortgage is even more of a challenge.

That said, getting a mortgage as a self-employed business person isn’t impossible. It might take more work on the part of the borrower, but there are things that business owners can do to ensure their mortgage applications are approved.

Give Your Business Time to Get Established

Most lenders want to see a minimum of two years’ worth of profits in business before they approve a mortgage application. Ideally, the business you run will have been in operation – and profitable – for at least two before applying for a mortgage. Having a short business history will make it more difficult to get approved because lenders might not be as confident that you’ll be able to cover your mortgage payments every month.

If your business is new or is just starting to turn a profit, consider waiting a couple of years before applying so you can prove consistent earnings year after year, which should increase your chances of getting approved for a mortgage.

Keep Business Growing

You should ideally be in business for at least a couple of years to boost your odds of loan approval. But how your business does within this time frame matters. Having a steady income from self-employment is important. And while a little fluctuation here and there might be OK, it should follow an upward trend.

Make Sure Your Credit Score is Strong

Credit scores play a crucial role in mortgage approval. Not only do lenders want to make sure that you have the income to sustain mortgage payments every billing cycle, but they also want to ensure that your track record is clean. If you have a history of missing debt payments, your credit score will reflect these habits.

With a bad credit score, your chances of getting approved for a mortgage are small. If your credit score is currently lagging, take steps to improve it. That includes making bill payments on time, spending no more than 30% of your credit card limit, and avoiding new loan applications.

Keep Cash Reserves

Your cash flow situation might change from one month to the next, but your obligations to pay your bills every month continue. Even if business is a little slow one month, your mortgage payments will still be due and have to be made.

To compensate for potential slow months in business, it’s helpful to have a financial cushion to fall back on. With a decent reserve of cash, you can dip into this account in order to make sure your mortgage payments are covered. Some lenders may even require that you have an emergency fund readily accessible in case of slower times.

Put Forth a Hefty Down Payment

A bigger down payment means a smaller loan amount to apply for. Plus, it gives lenders more assurance that you’ll be able to make your mortgage payments every month. And if other factors of your financial life aren’t that strong, a hefty down payment amount could be what tips the scale in your favor.

Gather Up as Much Documentation as Possible

Home loan applicants need to submit a ton of paperwork to lenders as part of the application process, and the situation for the self-employed is no different. Be prepared to submit as much financial documentation as possible so your lender isn’t left with any gaps. The more documents you can gather up that prove your financial strength, the better.

Generally speaking, you should collect the following info:

• Two years’ worth of personal and business tax returns
• Profit and loss statement
• Statement of assets and liabilities
• Business bank statements
• Business license
• List of debts
• Any additional income

Pay Down Your Debt

Your credit score is affected by many things, including your debt load. Too much debt could put you at risk of missing payments, which can negatively affect your credit score. On the flip side, your credit score can be improved by paying off as much of your debt as possible. Plus, it will reduce your debt-to-income ratio, which can make it easier for you to get approved for a home loan.

Keep Your Business Records Separate From Personal Finances

It will make things a lot easier for your lender if you have your personal and business financial information and accounts kept separate.

Cut Down on Tax Write-Offs

One of the benefits of owning a business is the ability to take advantage of tax deductions. Depending on the type of business that you run, you might have any number of expenses needed to run things, many of which can be written off.

But every time you deduct something from your taxes, you effectively reduce your income. But your income plays a key role in your ability to secure a mortgage. The lender wants to make sure that you earn enough to afford a loan.

To give your income a bit of a boost, consider writing off less on your tax return. Just be very careful about how you approach this tactic and speak with a tax specialist first. 

The Bottom Line

It might be a challenge to have your mortgage application approved if you’re self-employed, but it’s certainly not impossible. Be sure to do what you can to strengthen your credit rating and financial situation, and get all the proper documentation together when applying to boost your odds of mortgage approval.

I’m a fried chicken junkie- so when I heard that Parson’s Chicken and Fish opened a new Lincoln Park location, I had to go! Located at 2435 N Halsted St., the new spot is adorable. It has a huge outdoor patio, which is sure to be very popular come summertime. The tables feel like a dressed up picnic spot, with white shiplap benches and maple tabletops. A quirky marquis sign bears the name of the restaurant and beautiful green plants add a bright pop of color to the space. We came in on a Thursday evening around 6 and were seated right away. We were pleasantly surprised to find we caught the tail end of Happy Hour! They have great food and drink specials like $1 PBR’s, $4 draft beers, $5 Negroni slushies, $4 hush puppies and pimento toast, $2 oysters (broiled or raw), and $4 popcorn chicken. My mom is from Louisiana, so we love hush puppies and knew we had to try some! They’re made with Slagel Family Farm ham hock, cream cheese, and scallions, breaded with Three Sisters Garden Cornmeal and served with a harissa aioli. Unfortunately, these were nothing to write home about. I did like the cream cheese on the inside, it added great creaminess to the tiny fried balls. The harissa aioli was tasty, but not nearly spicy enough for my taste. I’m never mad about eating hush puppies, but I probably wouldn’t order these again. For my main meal, I knew I had to try the Hot Chicken Sandwich: chicken thigh tossed in Parson’s Hot Blend, topped with American cheese, slaw, hot sauce, aioli, and North Star pickles. This was FANTASTIC. I love that the sandwich is made with a chicken thigh- it was so rich and juicy! The slaw was delicious, it added the perfect amount of sweetness and crunch. The spice level on this was just right for me! I like spicy food, but I still want to be able to taste the flavor of the food itself, which I absolutely could. I would order this sandwich again in a heartbeat! It came with housemade potato chips, which were also very tasty. My dad and boyfriend ordered the same sandwich- but Demon Style! Demon Style is not for the faint of heart. It is super spicy! We also split an order of Mac and Cheese: rotini, aged gruyere, cheddar, and cheez-it bacon breadcrumbs. This was very good! The breadcrumbs were unique and gave the creamy pasta a nice texture. We also shared the Ponderosa Salad: Werp Farms Little Gem lettuce, beefsteak tomatoes, bacon lardons, red onion, aged cheddar, and creamy poppyseed dressing. This was my second favorite dish! All the ingredients were so fresh and the poppyseed dressing was marvelous. I can’t wait to come back to Parson’s! That chicken sandwich is calling to me already.

Parson’s has another location in Logan Square, located at 2952 W. Armitage Ave. Hours for both locations are Mondays through Fridays from 11 am to midnight, Saturdays and Sundays from 10 am to midnight, and brunch until 2 pm daily. Find more info here.

RACHEL HOOVLER & DEAN’S TEAM CHICAGO

If you’re actively in search of a new home or are just mulling over the idea of making a home purchase, open houses present an ideal opportunity to visit homes that have recently been listed on the market. There’s no need to make an appointment. Instead, you can just show up any time during the scheduled open house and check out the home at your leisure.

But the purpose of an open house is to sell homes. Sellers willingly allow complete strangers to make their way into their homes in hopes that at least one of the visitors will put in a decent offer. Considering the big sacrifice that sellers are making by prepping for an open house and opening their doors to the public, buyers should at least reciprocate by following a certain standard of etiquette.

If you’re planning to attend an open house this weekend, keep the following tips in mind to make sure you don’t step on the sellers’ toes or sabotage your negotiating power should you decide to put in an offer.

Don’t Take Up Too Much of the Agent’s Time

Sellers and their agents are putting in a lot of effort to hold an open house. And while there will certainly be a lot of visitors who are just passing the time on a Sunday afternoon, open houses aren’t meant for social gatherings.

After you’ve entered the home and briefly chatted with the listing agent, move on. Don’t spend all of your time chit chatting with the listing agent and taking their time away from other potential buyers.

Sure, you want to get as much info on the home as possible, especially if you’re interested in the home. But you can get all the detailed info you need from the property description sheet or brochure that is typically handed out at open houses.

Ask For Permission to Take Photos

You might want to take a picture of certain parts of the home so you can assess them after you’ve gone home for further consideration. But keep in mind that this is someone else’s home.

You likely wouldn’t feel comfortable having a stranger take photos of the inside of your house without your explicit permission, so make sure you ask for permission from the listing agent before you start snapping photos at an open house.

Don’t Be Too Nosy While Going Through Drawers and Closets

While it’s perfectly fine and even expected that buyers will be opening and closing all doors and drawers, it’s quite another thing to rummage through the seller’s personal things. Don’t mindlessly pull drawers open and sift through piles of clothes or jewelry boxes. Not only is that somewhat rude and inconsiderate, but it’s also an invasion of privacy.

Hold the Harsh Comments Until After You Leave

Sellers typically aren’t present during their open houses, specifically because it usually makes buyers feel uncomfortable. Buyers like to have the flexibility to go through the home and make comments without feeling as if the sellers are listening to every word or breathing down their necks.

That said, you might still want to practice a little bit of composure and hold back on some particularly harsh comments about the house. If there are some things that really turn you off, there’s no harm in saying something about it – within reason. The listing agent is still present in the home and likely within earshot, so you still want to be careful about what you say.

If you end up putting in an offer on the home, the listing agent may remember you and the comments you made, which can end up hurting your competitive edge if you find yourself competing with other buyers for the same property.

Don’t Give Away Too Much Information

Not only should you watch what you say about the property, but you should also be careful about the amount of information you divulge about your situation that could weaken your negotiating power. While there’s nothing wrong with discussing a little bit about your situation, giving out too much info about your motivations can be used against you at the negotiating table.

The Bottom Line

If you play your cards right when attending an open house, you can make the most of your visit, especially if you wind up putting in an offer. But beyond that, never forget that you’re walking around someone else’s home, so always be courteous.

When it comes to investing in real estate, location is everything. There are certain locations where demand is always high, which is key to ensuring profitability in this type of investing.

One such investment opportunity lies in student housing. Buying a property near colleges or universities will almost always afford you with the benefit of consistent demand. Students who choose not to live in dorms on campus still need someplace close by to live, which is where real estate investors can cash in on this in-demand market.

You’ll probably find it rather easy to find tenants. Just about every university or college town has some form of student housing available.

But like any other type of investment, it’s also important to be prudent about where to plunk down your hard-earned dollars when it comes to investing in student housing. Keep the following tips to make sure you’re profitable without taking on an unnecessary headache.

Try to Find a Unit as Close to the College as Possible

Choosing the right property is a crucial step in making sure you’re getting involved in a sound investment. Students typically prefer to rent places that are close to campus, usually within walking distance. Or else, something that’s within a quick bus ride to school or has a transit stop in close proximity also works.

The closer the unit is to the college, the more in demand it will be and the higher the rent you can charge.

Consider Renting by the Room

Rather than renting out an entire home, consider renting out the place by the room. This can help you collect more in rent money every month and beef up your bottom line. Students who want their own room without having to deal with others when it comes to rent might actually prefer this arrangement as opposed to renting to a group of students and charging one rent fee for the whole house.

For example, if you have a 4-bedroom home, you could potentially rent it out for $3,000 a month, hypothetically speaking. But if you rent out each individual bedroom and assign the kitchen and bathrooms as common spaces, you may be able to charge $900 per room instead. That would leave you with an extra $600 in your pocket every month.

Be Frugal With Your Finishes

If you buy a home that needs a little fixing up, be careful with how you finish the place. You’re not catering to buyers who are looking to call the place home for the long haul.

Instead, you’re offering a home to a demographic that doesn’t particularly care too much if the kitchen counters are granite versus laminate or if the floors are made of real wood versus vinyl. As long as the place is clean, functional, and decent-looking, you’re fine. Don’t spend money on things that won’t give you a good ROI.

Ask the Parents to Co-Sign the Lease

Students aren’t exactly known to have a ton of extra money lying around. In order to minimize the risks of being left hung to dry from lack of rent payment, you can ask the parents to be co-signers on the lease. This should reduce lease payment defaults.

Be Diligent About Lease Clauses

Students who are on their own for the first time will find this situation pretty exciting. But being young and having other priorities often means that students aren’t always the most reliable people when it comes to taking care of their place, especially since this is just a temporary situation. Students aren’t as responsible as long-term adult tenants might be, so there’s always a risk that they could do some major damage.

As such, be sure to make it very clear in the lease what will happen if a certain amount of damage is done. Clearly state how much money will be charged and how such fees will be payable.

Look Into Local Legislation

If you’re buying a property that’s not already designated student housing, you’ll have to do some due diligence to find out how your jurisdiction zones these types of dwellings.

There may be rules about how many rooms there can be and how many students can live in the place at once. There might also be student housing licenses that may be required, so find out if this is the case in the city you plan to buy in.

The Bottom Line

There’s plenty of money to be made investing in student housing. Be sure to work with a seasoned real estate agent who can help you make the right choice in property and speak with a mortgage broker who can give you all the ins and outs about the type of financing options you have available to you.