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8 Tips for Getting a Home Loan for Your Home-Based Business

Share! 9/16/2021
Wisconsin Buys Local - Tips for Getting a Home-Based Business Load

You’ve started a home-based business. After assessing your business needs, you realize you need a home loan to get a new home that’s well-suited for both your residential and business needs.

Getting a home loan for your home-based business can be challenging because the process can involve several complex obstacles, such as preparing multiple detailed documents about your finances.

Some of these obstacles are avoidable, but many of them you’ll just have to plow through. With the right knowledge, though, the process can be a bit more manageable. Wisconsin Buys Local shares some of that knowledge.

Tips for Getting a Home Loan for Your Home-Based Business

Lenders consider several factors to determine whether you qualify to receive a home loan. These factors include legal requirements, income, business growth, and credit score, among other factors. The following tips will improve the chances of loan officers approving your application.

  1. Get good help. Hire property, legal, and accounting professionals to help you identify and prepare all the documents you need to get a home loan. Your mortgage broker can help you find the loan product that’s most beneficial for you, as well as navigate the ins and outs of credit scores and reports.
  2. Demonstrate consistency. Highlight consistency in the year-to-year income, growth, and credit score so the lender sees you as an ideal borrower.
  3. Be wise about your tax deductions. Seek your accountant’s advice on how to take advantage of tax deductions while still showing your home-based business generates enough income to qualify for the loan.
  4. Improve your credit score. Use credit wisely to maintain a credit score that qualifies you for a home loan.
  5. Maximize your down payment. Show the lender you’re financially stable by offering to make a down payment of at least 50% of the purchase price.
  6. Cosign the loan. If your home loan applications get rejected frequently, consider asking a partner, spouse, or family member with a steady W-2 income to cosign your home loan to make you a less risky borrower.
  7. Maintain your tax status. Avoid changing your tax status within two years of applying for the home loan, as loan officers may interpret the change as a sign of financial instability.
  8. Leverage strong client relationships. Demonstrate your reliability to lenders by providing them with references to long-term clients who are happy with your products or services.

The Most Suitable Property for Your Home-Based Business

Once you obtain a home loan, thoroughly research homes in Madison to find one that fits your residential and business needs. Be sure to research local home prices to identify a property that lets you maximize the equity on the home you buy.

As you assess prospective homes, keep in mind how effectively the property lets you separate the residential and business spaces. Important considerations include a separate workspace, storage space for products, a separate entry for customers or clients, and a space for conducting client meetings.

Take Time to Get Your Finances in Order

As an entrepreneur in search of a home loan, we recommend implementing a pre-loan plan to set up your finances in a way that makes you attractive to prospective lenders. Several factors, such as good credit scores and steady business growth and revenues, improve the likelihood of lenders accepting your application for a home loan, so optimize these aspects of your finances.

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