If you’re a freelancer, gig worker, small business owner or independent contractor looking to buy a home, you might have already realized that the process will be a little different for you compared to wage employees. But fear not, you can still secure a mortgage and land the home of your dreams with some careful planning. We spoke to a panel of experts at Vita Lending in B.C. to understand how you can snag the best chance of success.
By lowering your taxable income by maximizing business expenses and personal deductions, you may be limiting your mortgage potential. There can be a discrepancy between what's on your tax return and how much money you actually earn. You may want to consider completing a statement of income. Basically, instead of relying on tax records or other documents to show your income, you make a statement declaring how much you make. If you’re taking the stated income route, stay reasonable in your declaration of income. Your lender will look at an average income for someone of similar experience and occupation.
As a business owner or self-employed individual, some lenders may be able to “gross up” your income, which is where you show how your gross income before taxes is actually higher than what appears in the final taxable amount. Usually, this is because you may have deducted a lot of legitimate expenses, some of which may be discretionary. If you choose to “gross up” your income, you’ll have to show how. Again, work with your broker to determine the best method to go about doing this.
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