Tips for Getting a Mortgage to Buy in Anchorage When You’re Self-Employed

Posted by Dan Wolf on Monday, December 22nd, 2014 at 8:04am.

Business owners and people who are self-employed in Anchorage, Alaska have a more difficult time getting a mortgage. When it comes to qualifying for the mortgage you need to buy your dream home, there are steps you can take to make the lending process less rocky. According to an article by CNBC, recent report by Zillow shows self-employed people often buy bigger homes and put more money down on the homes they buy. However, not as many lenders are willing to work with self-employed people who are seen as a higher risk. While employed people often have to provide paperwork such as proof they are still employed, their W-2 forms, pay stubs and financial records as well as tax returns, self employed people have to go above and beyond the standard.    

•    Organizing tax records

As a self-employed person seeking a mortgage to buy a home in Anchorage, Alaska, it’s important to have several years of tax forms. Even though writing off expenses helps lower your tax liability, it works against you when applying for a mortgage. The lender is not interested in how much business you did or how many clients you had, but how much taxable income you reported each year. According to CNBC, a lot of freelancers or self-employed people take advantage of tax breaks to lower their tax bill, which makes it hard for them to meet the income needed for the loan amount they think they can afford.

•    Using money from a Roth

One strategy to help you buy a home is to save money into a Roth IRA. You can withdrawal your contributions to a Roth IRA without any penalty or tax implications. You can’t touch the earnings on your money until retirement with some exceptions. If you are a first-time homebuyer, you may be able to use $10,000 toward your home purchase out of the Roth and other qualified retirement accounts, but check with your tax advisor for your particular situation. Any money saved into a Roth IRA has to be earned income, which means you can’t contribute years when you report a loss.

People who are self-employed will do better to put down a higher down payment when purchasing a home. With 20 percent or more down, you eliminate the extra cost of private mortgage insurance or PMI. Also, you won’t have to show as high of an income when it comes to the debt-to-income ratio if you are putting more money down. A higher down payment means you will not need to borrow as much to have the home you desire in Anchorage. Some self-employed people find it helpful to take on a part-time job with taxable income until they are finished with the mortgage process.

 

At Wolf Real Estate, we can help you find and buy an Anchorage home in a price range that fits within your budget. For more help buying or selling a home in Anchorage Alaska, please contact us at 907.227.1969.

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