Owning a home remains an important goal for a number of reasons, and that’s no less true if you’re self-employed.

Unfortunately, buying a home can be a little more complicated if you run your own business. Proof of income is usually easy to come by, but it’s harder to provide if you’re working for yourself.

Lenders will need proof that you’ll be able to meet your mortgage obligations by producing a steady income. If you’re getting a regular paycheck, that’s easy. But if you’re the only one guaranteeing your source of income, you’ll come off as a higher risk.

This can be a challenge, but fortunately, there are steps you can take to make yourself more attractive to lenders.

Work with a knowledgeable Realtor.

There is no better ally for a prospective home buyer than an experienced realtor who knows the market, the process, and the major players. After all, realtors don’t just help you find and view properties. They can also walk you through the home-buying process, advocate for your best interests, and recommend trusted lenders who cater to self-employed buyers. This could improve your chances of getting a loan and landing your dream home.

Keep good records.

Make sure your records go back to the beginning of your business and are easily accessible. If you’re self-employed, you’ll be used to this for tax purposes, so this part shouldn’t be unfamiliar to you.

When most people apply for a mortgage, they use their W-2 forms, but you don’t have one of those. Instead, your lender will want to see two years of your business tax returns. One year won’t be enough, because they need to know you’ve got a stable income for the long term.

The second part of keeping good records is to keep them organized so you can find them easily. Set up a filing system on your computer and back it up to an external hard drive. And print out a copy to keep in a file or file cabinet so you’ll have it when you need it to show potential lenders.

You don’t have to do this on your own: There are many financial software options out there to help you. PC Magazine has compiled a list of the best ones for small businesses.

Stay on top of your credit.

Good credit is even more important when you’re self-employed because it will indicate to lenders that you are not a risk. Since you don’t have an outside employer’s records to indicate your trustworthiness, your credit report will be all the more important.

Take advantage of federal law that entitles you to a free copy of your credit report every 12 months. Become familiar with your credit score and what goes into it. You should also know that, while there are several steps you can take to build or rebuild your credit, it takes time. A good FICO® credit score is anything above 670; it’s very good if it’s above 740; and anything 800 or over is exceptional.

Pay your bills on time and be cautious about applying for new credit, especially within a few months of applying for a mortgage. Be sure to resolve any late payments or delinquencies as soon as possible. Even if you qualify for a loan, your credit history will play a role in determining your interest rate.

Another step worth considering, if you can swing it: Make a bigger down payment. This will reduce the size of the loan you’ll need, which will make a lender more likely to work with you.

Limit your tax deductions.

It’s a good practice for small business owners to write off business expenses …. Normally, that is.

But too many tax deductions can lower your net income and hurt your debt-to-income ratio, which is a key factor lenders look at when deciding whether to offer a loan (and at what interest rate).

Most mortgage lenders are looking for a debt-to-income ratio somewhere in the neighborhood of 40%, so if you can keep yours in that ballpark, you’ll have a better chance going in.
Keep your finances separate.
Make sure your personal and business finances are kept separate. If accounts are blended or overlap, it’s hard to distinguish where one stops and the other starts. That means a lender will have a harder time determining whether you’re a good risk.

Consider putting yourself on your business’ payroll. Pay yourself a solid, competitive salary (without artificially inflating it). Lenders look at your annual income, whether it’s from an outside source or your own business. If your income is steady (or growing), it will look good on your application.

Also, if you take out loans for your business under your own name, you may appear to have more debt than you actually do. This could make your debt-to-income ratio seem higher than it actually is and give a mortgage lender pause about granting you a loan.

Be judicious about moving money.

If you want to move money between your business and personal accounts to have enough for a down payment, do so well before you apply for a loan: at least two months in advance. This is because down payment funds will have to be verified. You also don’t want to withdraw too much and leave your business in a difficult position.

Leverage your relationships.

Consider working with another small business in your area, rather than a national lender or major bank. This way, your status as a local small business could be an advantage. Credit unions and independent lenders are a great place to start.

Applying for a mortgage and buying a home is a complicated process for everyone, and it’s even more complex if you’re self-employed. So it’s important to do what you can to simplify the process and smooth out any potential bumps in the road ahead of time. (This is especially true right now, when home prices are at a premium.)

If you create a plan based on the steps listed here, there’s no reason you shouldn’t qualify for a loan at a reasonable interest rate — and be on your way to purchasing the home you want.

Guest Post by Jessica Larson, SolopreneurJournal.com