Keep ridiculously accurate financial records
Since traditional workers have their income reported by their employers, their chances of being pre-approved are much higher by default. This isn’t to say that the self-employed are handicapped – they just have to keep extremely detailed and accurate financial records. That does not mean you should start charting graphs for your lender, but it does mean that you must account for every earned cent earned. To put it another way, you must be able to prove how and why you are getting paid. This can be as simple as keeping a copy of your invoices and e-mail correspondents, just as long as you are able to answer the how and why of your business.
Maintain your credit score
Your credit score will arguably never be more popular than when you are considering buying a home – and that could be a bad thing if your credit score isn’t so healthy. As you shop for a lender, your credit score will be impacted with, ‘hard inquiries,’ which will lower your credit score slightly and temporarily so be sure to have at least a fair-to-good credit score in order to absorb the slight decrease. Beyond that, proving that you have a healthy credit score while being self-employed lets lenders know that pre-approving you may not be risky after all.
Be prepared to pay extra
In the end, be prepared to pay a little extra than your traditionally employed neighbours. This means you may have to pay a higher down payment, a higher interest rate, etc. Depending on your situation (i.e. location, spouse’s income, dependents, etc.), your lender may be able to work with you to lower your costs across the board, but it’s best to be prepared to pay more.