Securing a home loan even as an experienced entrepreneur can be tricky business. What about if your spouse is also an entrepreneur? My wife and I fall into the couplepreneur category. If you or your partner don't have traditional employment, that first home purchase, specifically qualifying for a good loan, can seem impossible. So in this article, I will impart some hard learned lessons and tips to our fellow power couples out there hoping to own a home one day.
First, let's acknowledge that you are in a unique life/work category. There are very few guides or best practices when you and your partner are both entrepreneurs.
It changes the environment of the entrepreneurial journey itself when both of you work with no nets. The cookie cutter advice out there rarely if ever is a fit for a true entrepreneurial household.
As a team, we've had to come up with our own answers most of the time, including how to go about buying a home. My wife and I are dealing with our third home together, and things have been much smoother this time around, and there are definitely certain things you should do to set yourself up for a better home buying experience.
The most important tip of all is this: Don't wait until you've found your dream home to get your financial act together. So before you go after that dream home, do these six things:
1. Keep your head up and your credit.
Get those scores up and pay down your debt. There are many books and programs to help you with this. Pick one and follow it with tenacity. Create a budget you can stick to, and pay down your debt as soon as possible.
2. Take care of your taxes early.
The powers that be will be looking at your taxes when you apply for a loan. Depending on where you live, there may be special loan opportunities for entrepreneurs. These programs are more considerate of the ebb and flow of gross and net income.
3. You need to be mindful of the accuracy of your write-offs.
More income means paying more in taxes, but on the bright side, this works in your favor as you seek to qualify for a loan. Keep your taxes accurate, and you may realize that you should be paying more in taxes for the first time. Adjust in favor of accuracy.
4. Fill your reserve funds.
You need to have reserves to qualify for a loan. Six months reserves to cover living and operations is pretty solid. Not only is this required for the loan process, it's also good practice.
5. Save money for your down payment.
This is separate from your reserve accounts. Depending on your financial situation, credit and income, you'll have to throw down three percent and up. My wife and I live in California. Three percent of any home value here is a lot of money.
6. Seek referrals for lenders from your wealth-building team.
If you don't have a wealth team, start building one now. That includes people like an accountant, a financial planner, a broker, and a real estate agent. The advice from these trusted advisors will help you navigate the journey from start to finish.
For those of you keeping score, all of these steps involve saving and paying out a great deal of money. Compared to those who chose a more standard model of employment, you will have to make more, show more, and do more.
There's no hack, no hustle, just straightforward work. You can do it. It's a new way to show the world how committed you are.
I lucked out and married up. My beautiful and crafty wife took proactive, disciplined steps for us long before we started thinking about buying a home. We paid down our debts and stuck to a budget with zealous precision. And it made even our first home purchase process that much easier.
It wasn't easy at first, but we didn't become entrepreneurs for easy money. We did it with the dream of building a great life.
The first time you buy a home, they should give you an adulting medal. It's a milestone -- and if you stick to these tips, discipline yourselves, and recruit a great wealth team, it'll be much easier to achieve.