Buying a Home with Side Hustle Income!

Welcome back to the Side Hustling DPT! As may of you know prior to COVID I was also a traveler! The market changed dramatically following March of 2020 resulting in me leaving the travel field. At the time I was unsure whether it would be a full time change or just a temporary change! Well, here we are in April of 2022 and I have yet to return to travel and still do not know if it will be a permanent or temporary change! During the pandemic the focus was on improving the housing options available for our medical travelers! During this time I have been considering purchasing another property and in this post we will look at buying a home and the challenges that have arisen since the COVID Pandemic! Lets look at some of the experiences I have had while trying to purchase a home post pandemic. 
1. Self-Employed Income: If you guys follow this blog and my additional blog, Nomadic Entrepreneur, then you know I have several side hustles that bring in passive income streams. When I first started looking at purchasing another home I assumed that these multiple revenue streams would improve my ability to purchase an additional property....that assumption was incorrect lol! So, I work as a W2 employee for one home health company  and as a 1099 contractor for one home health company. In addition to these two positions I won two small businesses and am a partner owner in two outpatient orthopedic clinics. In During my final phase of qualification the bank requested Schedule C for all side hustles, Profit and Loss Statements for all side hustles, two years of tax returns and two years of income history for each side hustle. The issue arose here because I did not have two years on all of my side hustles! So if you are self employed in any form you will want to make sure you have two years of documented pay with each side hustle you plan to use for qualification purposes. 
2. Expenses: To Deduct or Not to Deduct: Depending on your plans in the next 24 months whether you chose to deduct all your qualified business expenses or not may impact your ability to buy a home! In 2020 the medical housing business had an expensive year due to building a guest house! An exciting addition to the Emerald Coast Medical Housing business but also an expensive endeavor. Due to not planning to buy another property in 2021 our account deducted all qualified expenses for building the Guest House in the 202 Tax Year. This helped greatly with the tax bill for 202 but it was a big issue when I was attempting to qualify to buy another property in 2021! Instead of being able to use income from this business the deductions from building the guest house resulted in the business showing a loss for year! This means the bank viewed the business as a loss and not as a positive source of income! So think carefully about your plans for the next 24 months before you decide what deductions you should utilize with self-employed income!
3. Type of Loan: Ok, lets look at Loan type!! Many buyers think they have to have a large down payment to purchase a home but this is not always true! Important things to consider when looking at loan types include the fact that some loan types have limits on borrower income while others have limitations on geographic region that you can purchase in. One common loan type that many first time buyers chose is the FHA loan which allows the buyer to purchase with 3.5% down! The caveat with this type of loan is that you cannot have purchased a home in your name or been on the title of a home in 3 years. There are also income limits for the FHA however they are usually limits that are not restrictive for most buyers. The FHA income limit varies by state and often by county. In Florida the average income restriction is $420,680 in many of the counties! So this makes the FHA an appealing loan type for many! In 2022 if you wish to qualify for an FHA loan you will need two years of documented self-employed income with fully documented income, most recent 2 years of tax returns, and 3.5% down. you will also need a minimum credit score of 500 and you cannot have applied for bankruptcy in the previous 24 months! Click the link below to access current information for the FHA Loan and self-employed individuals.
www.fhalenders.com