First-Time Buyer with a Family Business Connection? Here's What You Need to Know!

Buying a home is one of the biggest financial decisions you'll ever make. It's also a major life milestone, and it's natural to want to feel confident every step of the way.

If you're a first-time buyer with a family business connection, you may be wondering how you can leverage your position for mortgage success. The good news is that there are a number of things you can do to increase your chances of approval and get a great rate on your loan!

In this blog post, we'll walk you through everything you need to know about getting a mortgage with a family business connection. We'll cover the basics of the lending process, the potential pitfalls to avoid, and the tips and tricks for making the most of your unique situation.

The link between family business and mortgage approval

There are a few reasons why having a family business connection can make it easier to get approved for a mortgage. 

1. Stable income

Lenders love stability. If your family business has a consistent income stream, it can provide the financial stability lenders are looking for. This can make them more inclined to approve your mortgage application.

2. Dependable reference 

Lenders may be more willing to work with you if you have a family member who is willing to co-sign on your loan. This can help you to qualify for a mortgage even if you have a lower credit score or less income than is generally required.

3. Family business connections 

Some lenders offer special mortgage programs for first-time buyers with family business connections. These programs may have lower down payment requirements or more flexible credit guidelines.

4. Larger down payments

If your family business has been successful, you might have more substantial savings. A larger down payment can lower your loan-to-value ratio, which is often a favourable factor for lenders. At The Lending Channel, we can then help you calculate the mortgage rates available to you so that you have a clear idea of what you can afford to borrow.

5. Proving your earnings

One challenge for many first-time buyers is proving their income.

If you're paid in a non-standard way as part of the family business, don't worry – we at The Lending Channel have solutions for that.

6. Expert Guidance

Having a family business means you have access to valuable financial advice. Your family business might have an accountant or financial advisor who can help you prepare your finances for the mortgage application.

Potential pitfalls to avoid

While a family business can work in your favour, there are a few potential pitfalls to steer clear of. Whenever a mortgage strays from the “standard” application path, it can become more complex to be approved.

These potential pitfalls are like roadblocks on your path to mortgage approval, but fear not, as we're here to help you navigate around them. Let’s have a look at some of the most common pitfalls to avoid:

1. Lack of documentation

If your family business doesn't maintain proper financial records, it can be challenging to prove your income. Ensuring you have detailed, up-to-date financial records is crucial.

2. Debts and liabilities 

Sometimes, a family business might carry debts or financial liabilities. It's essential to have a clear understanding of the financial health of the business and its potential impact on your mortgage application.

3. Credit scores

Your personal credit score still plays a vital role in your mortgage approval. Don't neglect this aspect, even if your family business is financially sound.

4. Tax efficiency

The tax structure of your family business can affect your ability to prove your income. Consult with a financial advisor to ensure your tax strategies align with your mortgage goals.

Making the most of your family business connection

Now, let's explore how you can make the most of your family business connection when applying for a mortgage. 

1. Documentation is key 

Ensure that your family business maintains detailed financial records. This will be vital in proving your income and financial stability to lenders.

1. Seek professional advice

Tap into the expertise of your family business's financial advisor or accountant. They can offer insights and guidance on preparing your finances for the mortgage application.

1. Manage your personal finances

Your personal financial health still matters. Keep an eye on your credit score, manage debts wisely, and maintain healthy personal financial habits.

1. Plan your taxes

Work with a tax professional to structure your finances in a way that's both tax-efficient and favourable for mortgage approval.

1. Build a solid down payment

If your family business has been successful, consider saving a substantial down payment. This can improve your loan-to-value ratio and make you a more attractive candidate for lenders.

Additional helpful advice

"When it comes to buying a home, most people can expect the process to take anywhere from two to six months," according to Kevin Buckthorpe, EVP, Freedom Mortgage.

To ensure a smoother journey, here are some extra tips you might want to keep in mind:

1. Don't hesitate to ask questions.
2. Shop around with multiple lenders before settling on an interest rate.
3. Avoid making significant credit purchases and refrain from moving cash around during the process.
4. Visit the property at various times of the day to get a genuine sense of the neighbourhood - morning, noon, and night.
5. Inquire about any inspections or disclosures the seller may have upfront. Being aware of any significant property issues beforehand can save you both time and emotional stress. 

And one last piece of advice that comes up from almost everyone who has gone through a similar experience in the past; Remember to enjoy the journey! This is a remarkable milestone, and you'll want to look back on it with fond memories.

Securing your mortgage future

As a first-time buyer with a family business connection, you're in a promising position to achieve mortgage approval.

By ensuring your financial documentation is in order, seeking professional advice from our experts, and managing both your personal and business finances prudently, you can harness the full potential of your family business connection. The Lending Channel is here to assist you every step of the way in turning your dream of homeownership into a reality.

Ready to explore your mortgage options with us? Contact The Lending Channel today, and let's get you one step closer to your dream home.