Thinking about leaving your current job and starting your own business in Oklahoma?
Entrepreneurship gives you the freedom to follow your dreams and achieve new goals. However, a start-up can also affect your other dreams — like homeownership — for years to come. It’s important to consider all of the implications of starting a business before you dive in with both feet.
Financial
Every business is different, but it is important to realize that most new businesses are not profitable right away. Legal and accounting fees, inventory purchases, employee expenses, and countless other expenditures will draw down your cash. It simply takes time to get enough customers and revenue to make a new business profitable.
Accountants can help a new business owner with deductions to reduce his or her tax burden, often showing a loss for the first few years. This can be helpful with your start-up, but not for your ability to qualify for a loan.
Keep in mind that it may take a few years for your finances to become stable enough to qualify for a home loan.
Work History
If you quit your “normal” job to start a business, it will impact your work history when qualifying for a loan. In most cases, lenders require your business to be in existence for a minimum of two years before lending you money.
Your lender will want to see the documentation for two years of stable, solid income. They will also want to know that you have a strong, positive income in the current year-to-date.
Timing
When possible, it is best to get settled into your new home before making any major career changes. Consider starting your new venture on the side and use your income from your day job to qualify for a home loan.
As you increase your cash reserves and build a customer base, you can choose when the time is right to leave your job. By the time you go all-in on the new business, you’ll have a thorough understanding of all of your homeownership expenses.
If you’re dreaming of owning a home but you’ve already left traditional employment, avoid making any large purchases with your newfound profits. Sizable purchases can affect your debt-to-income ratio and make it more difficult to qualify for a home loan.
Is Now the Right Time to Buy a Home?
Timing is critical when you are considering starting a new business and planning to buy a home. A consultation with one of our Loan Officers can help you feel confident in your business decisions and help you get the home loan you desire.
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