Taking the leap into self-employment is one of the most rewarding things you can do. Unfortunately, it also leaves you with a whole new set of issues to deal with. Things that were once simple, like getting approved for a loan, are now more challenging. 

If you're self-employed and looking at Las Vegas homes for sale, you might wonder how much trouble you'll have getting approved for a mortgage. Don't worry too much: Our real estate agents help entrepreneurs buy new homes all the time!

These simple tips will help you go through the mortgage approval process with ease. 

• Document Your Income
  The ability to properly document your income is one of the biggest challenges faced by self-employed individuals. Your lender will not only be looking for proof that you earn enough throughout the year, but also that you don't experience wild income fluctuations that could impact your ability to pay a monthly mortgage.
  
  While most people who work for an employer would simply provide copies of their W-2 documents, you'll have to jump through a few more hoops. You'll typically need to provide your last two years of tax returns and show that your business income is steadily growing year-over-year. You may also need to show profit and loss reports or 1099 tax documents.
  
  
• Understand Your Debt-to-Income Ratio
  It's not uncommon for self-employed business owners to pay their business debt from personal accounts or to use their personal credit cards for business expenses. Doing this can throw off your debt-to-income ratio (DTI), making it hard for you to get approved.
  
  To calculate your DTI ratio, add up all the monthly payments you make to lenders (ex. student loan, auto loan, etc.) and divide this total by your gross monthly income.
  
  In general, lenders like to see this ratio below 36% of your gross income—but this number would include your potential new mortgage payment. Assume, for example, that you have $500 in monthly debt payments now and your new mortgage would be $1,200 per month. If your income was $6,000 per month, your DTI would be 28.3%.
  
  A challenge that self-employed people face is that lenders use your net income (after business expenses) to calculate this ratio. In the example above, if you had $1,000 per month in business expenses, only $5,000 would be counted as your income, bringing your DTI to 34%.
  
  
• Don't Mix Business and Pleasure
  All borrowers need a good credit score to qualify for the best loans. The highest score you can get is 850, and anything above 749 is considered excellent. Carrying large amounts of business debts on your personal cards will pull down your score. If you happen to miss a payment, that will drag your score down even further.
  
  Paying for business expenses from your personal accounts can also make it harder to produce the profit and loss statements you'll need. Start cleaning things up now by making sure you have a separate business checking account and a business credit card. Use these accounts to pay all business expenses without exception.
  
  
• Get Your Paperwork in Order
  There's a good chance your bank will ask for other documentation during the mortgage review process. This includes: 

1. 1. Your most recent investment and bank account statements
   2. Two years of residential history (including landlord contact information, if applicable)
   3. Proof of funds for your down payment
   4. Documentation regarding any other real estate you currently own

Gathering all of the items you need and making sure you're prepared to meet requirements will help put you in the best position for quick and easy approval.

Are You Ready to Find Your Dream Home in Vegas? 

Our number one goal is to ensure you have an excellent home-buying experience, and our real estate agents make it their mission to go above and beyond what's expected. If you're searching for your dream home in the LasVegas area, we're here to help. Contact Wardley Real Estate today to get started!