Being self employed has its perks. It also has its fair share of challenges. I’d heard from colleagues in the world of online health and fitness that buying and/or building a home was a TASK when it came to securing their loan.

Before we begin I have to make clear that this is not financial advice and should not take the place of financial or legal professionals in the process of applying, qualifying for or securing any type of loan. Please seek help from qualified professionals (loan officers, bankers, real estate agents and the sort).

In 2020 we made the call to buy land and build our dream home. Or at least decided to pursue that route.

Step one was to see how much we could qualify for, PERIOD.

Know if you’re building or buying because these are two (potentially three) different scenarios when it comes to applying for and qualifying for a loan.

In our case, we planned to secure the land loan on 5 acres. Then explore securing a construction loan. This was in comparison to applying for an “all-in-one loan.” We simply couldn’t qualify for the total amount we wanted in order to build our dream home. The Millers needed more time.

So, land first. Save + build equity in the land. Use that as a down payment on the construction loan. This was our route. The route that made most sense.

What does being self employed have to do with this? Everything.

When we applied, they take the last two years of taxes + your current debt to income ratio to determine your qualification. It doesn’t matter if it’s December of the current year. That year means nothing. Previous two years of taxes.

For us, that meant 2018 and 2019. Well, in 2018, Nate was employed for four months before we took off for world travels. But his income from that year were VOID because he no longer works. So they took the average of ONLY my income from my online business in 2018 and 2019.

That made it very clear to us that we needed to wait to file 2020 taxes before we moved forward with a loan. That is precisely what happened.

In our area (Vancouver, Washington), to secure a land loan, you need 25-30% down. For us, the math just made sense. 25-30% on our land loan made for a nice downpayment via equity on our build loan.

EXPLORE YOUR OPTIONS – that is what I encourage you to do.

There is more than one approach to building a home.

Remember we postponed this due to needing two years of solid income (via filed tax returns).

**keep in mind this may be way easier if you’re a two income home! I can’t speak to that.

When it came time to apply + qualify for the construction loan, more options appeared. But those have nothing to do with being self employed.

Know that your business filing structure matters – Sole Prop vs LLC vs S Corp.

We applied in 2021 in order to use 2019 and 2020 tax returns. I figured that was easy because I was an LLC for both of those years. Not so fast.

Of course, your current income and business performance will matter when they check accounts and up to date profit and loss.

My business became an S Corp in 2021. So, my income looked different in 2020 than 2021. Even though my business had higher rev in 2021, the business structure caused a discrepancy in personal income. That “discrepancy” in personal income required a letter from me. All we had to do was explain the change from LLC to S Corp.

Based on other people’s experience I was expecting way more of a headache.

Your state, city, county may have different requirements. My input is:

• Inquire with banks as to what you need to have prepared
• Have up to date itemized profit and loss
• Proof of income (bank accounts and or pay stubs if applicable)
• Past tax returns

Basically…have your shit together as a business owner when it comes to your finances, and prepare by asking questions ahead of time. In addition, expect some hiccups. Clarification may be needed, and there are always options!

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