Starting a home-based business has numerous perks. Rather than having to commute to a physical office or storefront — and pay rent for that property — you can run your business from any room of your choosing. You have the freedom to make your own schedule, you can take advantage of amazing tax deductions, and you can save big on other operational expenses.
Whether starting a new business or expanding your existing one, some home-based businesses require added space that your current home cannot accommodate. Instead of renting a separate space, moving into a larger home is often the best solution.
Create a home buying to-do list
Before fully jumping into the search for your new home, it is important to assemble a home buying to-do list for yourself. This list will help guide your decisions throughout the process, and allow you to know what resources you have in advance.
This list should include your budget range, what style and size of home you desire, what neighborhoods you want to search, realtor referrals, and anything else that will be essential to know before starting your home buying journey.
Research home loan options
Even people who’ve purchased a home in the past can benefit from a refresher course on the different types of home loan options that are available. Some of the most popular mortgage types include VA loans, conventional loans, FHA loans, and USDA loans. Each has different mortgage interest rates, repayment timelines, and conditions. Prior to meeting with one of our experienced loan brokers at Desert Springs Mortgage LLC, having a basic understanding of these loan types is helpful. And if this is your first time purchasing a home, it’s a good idea to understand the many myths that you may have heard about.
Check your credit score
When was the last time you pulled up your credit score online? If it has been more than one month, it is time to see where you stand. Scores with each of the top credit bureaus change monthly, so it is good to know where you stand in real-time. Checking your score has no impact on your credit, so feel free to routinely check it during the home buying process.
If your score is below 650, do what you can to raise it before applying for a mortgage. You can do this by bringing any past due balances current, and paying down all of your debts as much as possible. Also, do not maintain revolving balances on your credit cards that are higher than 30% of your total credit limit.
Get your mortgage rate quote
Once you’ve prepared the basics, and know where you stand credit-wise, it is time to get a custom mortgage rate quote. Oftentimes, this is when you can also obtain pre-approval for a home loan. This is the stage at which you will know exactly how much you can afford, and what specific interest rate you will be paying on your home loan.
Prepare all financial documents
As an entrepreneur, getting approved for a home loan is a bit more challenging than it is for individuals who work for a company. Rather than being able to show proof of a consistent paycheck from an employer, you need to prove that you are earning what you say you are earning. Additionally, since business can fluctuate at a moment’s notice, there is more risk involved on the part of the lender. Due to this inherent risk, they will want to see that you’ve been steadily earning a set income that is more than enough to make your monthly payments.
This is why preparing and organizing all of your financial documents from the last several years is so critical. Gather copies of your tax returns (personal and business), your bank statements (checking, savings, and business), and anything else that can demonstrate that you are earning what you say you are earning. You can never be too prepared or too organized when it comes to your financial documents.
Select a home that fits all of your personal and home-based business needs
As you work through the home loan application and approval process, search for a house that fits both your personal and professional needs. Running a home-based business can be all-consuming, and it can be easy to put the needs of your business first. However, since you won’t just be conducting business from your home, it needs to be suitable for all of your day-to-day living needs.
One additional consideration: Before deciding on a home, check HOA regulations in your chosen neighborhood. Some HOAs prohibit home-based businesses, so you will want to ensure that you are moving into an area where your business will be allowed to operate.
In addition to moving to a home that has more space, consider making custom upgrades to your new residence. Just because a feature doesn’t currently exist in any of the homes you are considering doesn’t mean that it cannot be installed. The addition of extra electrical outlets, walls, shelves, closets, and counter space can transform your new home into an exceptional space for your home-based business. Contact us today at (623) 432-1309 for more information about our loan options and other concerns.