One of the first things we did when we officially started calling ourselves “house hunters” was figure out how much house we could actually afford. We know what’s in our bank account and what monthly mortgage payment we feel comfortable with, but the reality is that it isn’t just about our own comfort—it’s about what lenders will approve. So we booked an appointment with our mortgage lender (the same person who helped us buy and later refinance our current home) to review our finances and estimate the loan amount we could expect. That number would immediately define the price range we should be searching in.
We approached the meeting cautiously optimistic. Since our initial purchase in 2006, we’ve saved more and we’re now married, so combining our finances seemed like it would strengthen our application. Back in ’06, Sherry was just a few months into self-employment and her income was considered unstable, so I had to qualify for the mortgage on my own. Fast-forward a few years: although we thought we were in a better position, lending standards are tighter now and the way lenders count income has changed—especially with recent self-employment on both our ends. Admittedly, I’ve now been self-employed for only a few months, so the lender might view my income as less established.
Before the appointment we compiled tax returns, W-2s, and current bank statements so the lender could get the clearest picture possible. The news wasn’t great. Because I’m no longer employed by the company that provided most of our income in 2009, the lender said they could not count that employer income toward our approval. In short, they would base the approval only on income documented from our current jobs on our 2009 taxes. Without diving into specific figures, that left us looking much less established than we felt—more like two people just starting out rather than a couple who had been working steadily for years.
Our lender explained that if we wanted to have our current year’s income from the blog considered, we’d need to wait until our 2010 tax return was filed and officially on record next spring. That meant postponing any increase in borrowing power based on earnings from this year.
For a minute we braced ourselves to put the house hunt on hold. Then our lender offered a silver lining: despite the income complication, our strong credit scores and a history of on-time mortgage payments on our current home could still qualify us for a loan amount equivalent to the value of our existing house. That wasn’t perfect—buying a home at the same price wouldn’t give us the extra square footage we’re hoping for as our family grows—but it was better than being shut out entirely.
Even better, the lender reminded us that we could leverage the equity we’ve built up in our current home after selling it. We’d paid off a significant portion of the mortgage and put a substantial down payment on this place, so the proceeds from a sale could be rolled into the purchase of our next house. Translating that into plain terms: our next home could be more than this house on paper, because the equity would increase our buying power. We’re not planning to overspend, but it was reassuring to know we wouldn’t be stretching beyond our means—and that the bank’s approval could reflect that reality.
Clearly, choosing to go self-employed—especially when both partners have recent self-employment—can complicate mortgage approvals. It’s a valuable lesson for anyone considering a similar move: timing matters, and lenders often rely on tax history more than recent promise.
In the end, we’re pleased with the pre-approval result. The loan amount we were approved for puts us in the right range to find a slightly larger home—basically the size increase we had once considered adding to our current house with a small addition. That means room to grow without taking on risky financial strain. Plus, being pre-approved gives us more credibility with real estate agents and sellers, which can be an advantage in a competitive market.
With the financing piece mostly sorted, our next step is to get specific about what we want in style, layout, and features for the next house. If you know Sherry, you know a checklist is coming—she’s already started making one.
P.S. We announced this week’s contest winner in Monday’s original contest post—check that post to see if you won.