If you’re a business owner who’s about to close on a home, you may be asking yourself, “Why is so much documentation needed to prove the obvious?” Self-employed buyers and borrowers who are clearly credible, financially stable, and qualified home loan candidates are often surprised by the amount of paperwork that’s required to complete the application process.
But don’t worry – this collection of documents is by no means a method of interrogation. If one of our loan officers asks for highly specific documentation regarding your business, or, one of your many businesses, it’s only because he or she is complying with an existing set of underwriting guidelines – and more importantly, gathering all the information necessary to meet your specific needs.
In most cases, there will be plenty of variation among the particular tax documents and official forms you’ll need on hand throughout the application process. To keep you from digging around for piles of paperwork at the last second, we’ve put together a list of common documents that business owners are often asked to provide before buying a home.
- In order to get the best rates, you’ll need to provide two years of business tax returns in addition to your personal tax returns. As a business owner, income verification gets a little more complicated. Preparing the proper tax forms in advance will increase your chances of getting the best available rate on your loan. If you are not able to provide tax returns, then additional documentation will be needed, including profit-and-loss statements and balance sheets.
- If you’re on extension, and haven’t filed your most recent tax returns for one of the businesses you own, then you will need to provide a profit-and-loss statement for that business. This document must be provided for both the previous year as well as the first quarter of the current year. Keep in mind, this paperwork also needs to be signed and approved by someone other than the borrower, such as a CFO or CPA. In addition, you will be asked to disclose accompanying balance sheets for each profit-and-loss statement.
- The balance sheet gives mortgage lenders a look into your business’ assets and liabilities. Lenders are interested in seeing this particular document because it can help determine your business’ overall financial well-being. Having clear documentation that verifies current assets, fixed assets and your business’ income and debt ratios will help lenders provide the best rates possible.
The amount of paperwork a business owner needs to present before closing on a home, no matter how qualified the individual and their business may be, can be incredibly overwhelming. Knowing what to expect before going into the process and the amount of paperwork you’re able to produce will give you the best interest rate available while streamlining the process.
Accunet’s concierge approach to client relationships is what sets us apart from the pack. Our experienced team of mortgage professionals do their best to be transparent with business owners about the exact documentation required for each and every unique loan application that comes through the door. As Accunet President Brian Wickert puts it, documentation is how we make sure “the goose that’s producing all the golden eggs of income is healthy.”
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