Dirty Alchemy

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5 Tips For Business Owners who Want to Buy a House

Sam Garcia

This week’s podcast is a little bit different…

It’s a PSA for every entrepreneur who wants to buy property in the next several years.

If you want to buy a home or land there are things you need to start planning now – even if you don’t plan to sign the paperwork for a few years.

This year, I’ve been going through the experience of buying property in the most expensive real estate market in the US… as a self-employed person (which totally changes the game).

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Our process would have been significantly easier if someone had told us the things I’m about to tell you.

Tune in if you have even an inkling that you might want to buy property down the line.

Disclaimer: I am not a realtor and this is not financial advice. This is merely me speaking from personal experience as a self-employed person who is currently in the throes of the home-buying process!

#1: Focus on your net income

For people who work traditional jobs, getting a loan can be as simple as handing a loan officer your W2 form and a downpayment.

If you’re self-employed, it’s not that simple. 

You need to show them 2 - 3 years of tax returns and show them your net income. Some loan officers will average these previous years to see your income – which can complicate things if you expect your business to grow rapidly in the next few years and you want a larger loan.

That means that you will almost definitely want to hire an accountant to help you determine what you should be writing off on your taxes right now if you want to buy expensive property in the future. Because the amount of net income you have after all the travel, courses, and business expenses you write off will be the amount of income the loan officer sees.

#2: Raise your credit score

Your credit (and your partner’s credit, if you’re married) will impact your interest rate, which directly impacts what your mortgage is going to be. If you have any outstanding debts, or if you have credit cards where you aren’t paying off the full amount every month, get on that. 

And if you don’t yet have much credit, start building it. Get a credit card and start making small payments on it.

Your loan officer is going to look at your debt to income ratio – which means that any outstanding debts you have could potentially impact your ability to get a loan.

#3: Don’t wait until you found the perfect spot to talk to loan officers

My husband and I waited until we found the exact property we wanted to buy before we started talking to realtors, loan officers, and banks. Do not do this!

These industries vary so much from person to person. Some of them are anti-self employment. Some of them work with self-employed people all the time!

Look into your local credit union, as they’re more likely to give loans to self-employed people.

#4: Start manifesting NOW

The more you know about what it looks like to buy a home, the more you will believe that it is possible. And the more you know about the process of applying and getting a loan, the more clarity you will have as you think about manifesting this.

This can make the process go faster, and it can also make it feel fun and dreamy rather than like you’re on a time crunch!

#5: Down payments vary a ton

You see down payments as low as 5% of the total cost, but if you can put 20% of the cost in your down payment, you won’t need to buy mortgage insurance in the form of a PMI. This is an additional fee you pay every single month.

So, don’t underestimate the power of a bigger down payment!

#6: If you’re buying land instead of a house with a mortgage, the process looks completely different

My husband and I are buying 7 acres of land to build an off-grid farm on Maui.

Buying land looks really different from buying a mortgage.

I know there are a lot of other weirdos, survivalists, and permaculture people in this audience – so I wanted to share more about that process for us.

In general, lenders want 30% of the land price down. And it’s often a much higher interest rate than buying a house with a mortgage.

If you’re interested in farming, there is a beginner farmer USDA loan with a lower interest rate (there’s also a minority farmer USDA loan available for basically anyone who isn’t a white man!). 

Go into your local USDA office and talk to the people there, because they’ve been so helpful to walk us through the loan application process. Right now, the interest rate on that is only 1.5%!

Biggest takeaway… your home buying process will be much easier if you start thinking about it NOW instead of waiting until you find the property you want.

Let’s stay in touch!