Getting a mortgage while self-employed
Would it be worth legitimizing his business or is it too late at this point? To be blunt, you're asking if we recommend that he stop breaking the law. The answer is obviously yes, he should be declaring his income. And it would probably benefit him to get on the same page as his employer (or client) so they can both start obeying the law together. Once he's filed a tax return for 2016 that would certainly help his cause as far as a lender is concerned, and  as soon as he can provide some recent pay stubs (or paid invoices) he should be ready to move forward on the mortgage based on that additional income.
You can open a self-employed 401k, here's an example. You can deposit up to 50K (including the personal cap and the profit sharing/matching portion). "You can shop for a mortgage rate without actually submitting a mortgage application.  Unfortunately, the U.S. Government has made it illegal for the banks to give you a ""good faith estimate"" of the mortgage cost and terms without submitting a mortgage application.  On the other hand, government regulations make the ""good faith estimates"" somewhat misleading.  (For one thing, they rarely are good for estimating how much money you will need to ""bring to the closing table"".) My understanding is that in the United States, multiple credit checks within a two-week period while shopping for a mortgage are combined to ding your credit rating only once. You need the following information to shop for a mortgage: A realistic ""appraisal value"".  Unless your market is going up quickly, a fair purchase price is usually close enough. Your expected loan amount (which you or a banker can estimate based on your down payment and likely closing costs). Your middle credit score, for purposes of mortgage applications.  (If you have a co-borrower, such as a spouse, many banks use the lower of the two persons' middle credit score). The annual property tax cost for the property, taking into account the new purchase price. The annual cost of homeowners' insurance. The annual cost of homeowners' association dues. Your minimum monthly payments on all debt.  Banks tend to round up the minimum payments.  Also, banks care whether any of that debt is secured by real estate. Your monthly income.  Banks usually include just the amount for which you can show that you are currently in the job, with regular paychecks and tax withholding, and that you have been in similar jobs (or training for such jobs) for the last two full years.  Banks usually subtract out any business losses that show up on tax returns.  There are special rules for alimony and child support payments. The loan terms you want, such as a 15-year fixed rate or 30-year fixed rate. The amount of points you are willing to pay.  Many banks are willing to lower your ""note rate"" by 0.125% if you pay 0.5% up-front.  The pros and cons of paying points is a good topic for another question. Whether you want a so-called ""no-fee"" or ""no-closing cost"" loan.  These loans cost less up-front, but have a higher ""note rate"". Unless you ask for a ""no-fee"" or ""no-closing cost"" loan, most banks have similar charges for things like: So the big differences are usually in: As discussed above, you can come up with a simple number for (roughly) comparing fixed-rate mortgage loan offers.  Take the loan origination (and similar) fees, and divide them by the loan amount.  Divide that percentage by 4.  Add that percentage to the ""note rate"" for a loan with ""no points"".  Use that last adjusted note rate to compare offers.  (This method works because you have the choice of using up-front savings to pay ""points"" to lower the ""note rate"".) Notice that once you have your middle credit score, you can ask other lenders to estimate the information above without actually submitting another loan application.  Because the mortgage market fluctuates, you should compare rates on the same morning of the same day.  You might want to check with three lenders, to see if your real estate agent's friend is competitive:" If you have self-employment income you can open a Solo 401k.  Your question is unclear as to what your employment status is.  If you are self-employed as an independent contractor, you can open a Solo 401k.  You can still do this even if you also earn non-self-employment income (i.e., you are an employee and receive a W-2).  However, the limits for contributions to a Solo 401k are based on your self-mployment income, not your total income, so if you have only a small amount of self-employment income, you won't be able to contribute much to the Solo 401k.  You may be able to reduce your taxes somewhat, but it's not like you can earn $1000 of self-employment income, open a Solo 401k, and dump $5000 into it; the limits don't work that way. I don't quite understand your thought process here.  First, in a tax-advantaged retirement account you are NOT allowed to engage in a transaction with yourself.   If you just want to run a business and be able to write off expenses, how is using the self-directed IRA relevant? You can either buy the condo using your tax-advantaged account and rent it out to regular tenants.  Or you buy the condo yourself using your own money and then operate your business so you can deduct business expenses from doing so.  401k's allow you to take a loan out of it, so you can look into that as well. Note: I am in the UK. I don't know specifically about australia but I expect the general principles will be much the same everywhere. What banks want is to be reasonablly confident that you have a steady income stream that will continue to pay the mortgate until it completes.  In general employed are fairly easy to assess. Most employed people will have a steady basic pay that increases through their career. Payslips will usually seperate-out basic pay, overtime and bonuses. There is little opertunity to cook the books. The self-employed are harder to assess. Income can be bursty and there are far more opertunities for cooking the books to make it look like you are earning more than you really are. So banks are likely to be far more careful about lending to the self-employed, they will likely want to see multiple years of buisness records so that any bursts, whether natural due to the ebbs and flows of buisness or deliberatly created to cook the books average out and they can see the overall pattern. A large deposit will help because it reduces the risk to the bank in the event of a default. Similarly not being anywhere near your limit of affordability will help. "Your question asks ""how"" but ""if"" may be your issue. Most companies will not permit an external transfer while still employed, or under a certain age, 55 or so.  If yours is one of the rare companies that permits a transfer, you simply open an IRA with the broker of your choice. Schwab, Fidelity, eTrade, or a dozen others. That broker will give you the paperwork you need to fill out, and they initiate the transfer.  I assume you want an IRA in which you can invest in stocks or funds of your choosing. A traditional IRA. The term ""self-directed"" has another meaning, often associated with the account that permits real estate purchases inside the account. The brokers I listed do not handle that, those custodians have a different business model and are typically smaller firms with fewer offices, not country-wide." There are a few loan programs that grant exceptions to bankruptcy requirements in the event of extenuating circumstances that can be proven to be outside of your control (i.e. massive medical bills that you used bankruptcy to settle, etc.) however, in order to make the case for this exemption, you would need to make a strong case for your solvency, shown the ability to re-establish your credit reputation since the discharge of your bankruptcy, and would almost certainly have to go through a bank that offers manual underwriting. Additionally, if you are Native American, the HUD-184 program is a great option for your situation as it allows for a wide latitude in terms of underwriter discretion and is always manually underwritten as there is no automated underwriting system developed for the loan program. There are several great lenders that offer nationwide financing (as long as you're in a HUD-184 eligible area) and would be a great potential solution if you meet the qualifying parameter of being Native American. "Not unless you have something else to put up as collateral. The bank wants a basic assurance that you're not going to immediately move the money to the Caymans and disappear. 999 times out of 1000, the collateral for a home mortgage is the home itself (which you wouldn't be able to take with you if you decided to disappear), so signing up for a 30 year mortgage on a nonexistent house is probably going to get you laughed out of the bank. It's sometimes possible to negotiate something else as collateral; you may, for instance, have a portfolio of securities worth the loan principal, that you can put in escrow for the term of the loan (the securities will stay in your name and make you money, but if you default on the loan the bank goes to the escrow company and takes the portfolio for their own). The bank will consider the risk of value loss on the securities in the portfolio, and may ask for a higher collateral value or only allow a lower loan amount. In all cases, it's usually a bad idea to go into long-term personal debt just to get ""cheap money"" that you can use to beat the interest rate with some business plan or investment. If you have a business plan, take that to the bank with an LLC and ask for a business loan. The business itself, if the plan is sound, should become valuable, and the terms of business loans take that into account, allowing for a ""shrinking collateral"" transferring the initial personal risk of the loan to the business." My mortgage started out with an escrow, but it seemed like they were mismanaging it. They often over-collected it and locked up my money unnecessarily or under-collected and had to catch up later to pay the tax bill. Despite what Vitalik said, I told them I would pay my own taxes and insurance and to stop the escrow and they did without argument. Keep in mind, you should only do this if you are good about saving money. The banks know that many people aren't and will have trouble at the end of the year when a multi-thousand dollar tax or insurance bill comes due, hence the reason they try to get you to do the escrow.  In my case, I just had the estimated tax/escrow amount automatically deposited from my paycheck into a special interest bearing savings account that I manage. It sounds like you may need to look into the different types of personal loans that are available to you. Typically, they are in 2 categories: secured vs unsecured. A personal loan is usually of the unsecured variety, meaning that the bank is loaning you money with no collateral to use if you default. These loans will have much higher interest rates than a secured loan. A prime example of a secured loan would be a mortgage or an equity line of credit.  If you want an unsecured personal loan to use towards making those improvements, then whether or not you receive the loan will depend on your credit rating and income status. As Aganju stated, these loans don't really care what the money is used for. Because it's not your property that you're fixing up, you won't be able to get a secured loan against that property. If your mother took out a loan against her home (like a second mortgage), she may be able to get a significantly lower interest rate than what you'll get with an unsecured loan. She could also look into a renovation/remodeling loan, which would require information regarding the work being done such as costs and how it will improve the value of the property. If she used an equity line of credit instead, then they don't typically care what the money will be used for as it's just a credit line against the equity she's already built into her mortgage payments over the years. You're effectively looking for a mortgage for a new self-build house.  At the beginning, you should be able to get a mortgage based on the value of the land only.  They may be willing to lend more as the build progresses. Try to find a company that specializes in this sort of mortgage. "Your plan as proposed will not work, because it goes against how banks make money. Banks make money in two ways:  (1) Fees [including account fees, investment advice fees, mortgage application fees, etc.]; and (2) Interest Rate Spread. They borrow money for x%, and they lend it out for x+y%. In a simple form, someone gives the bank a deposit, and earns 1%. The bank turns around to the next person in line and loans the money to them for 4%. You are asking them to turn the interest rate spread into a cost instead of their main source of profit: You are asking the bank to borrow money from another person paying them 1.2% interest, and then loan the money to you, paying you 0.6% interest and keeping 0.6% for themselves. The bank would lose money doing this. Technically yes, you can borrow from a bank and invest it in something earning above the 4% interest they will charge you. You can then pay the bank's interest off of your earnings, and make some profit for yourself. BUT this carries an inherent risk: If your investment loses money, you still owe the bank, effectively increasing the negative impact of your investment. This tactic is called ""Leveraging""; you can look it up on this site or on google. It is not something you should do if you do not fully understand the risks you are taking on. Given that you are asking this question, I would suggest tactfully that you are not yet well informed enough to make this sort of investment. You run serious risk of losing everything if you over-leverage (assuming the banks will even lend you money in the first place)." Used car dealers will sometimes deliberately issue high-interest-rate subprime loans to folks who have poor credit. But taking that kind of risk on a mortgage, when you aren't also taking profit out of the sale, really isn't of interest to anyone who cares about making a profit. There might be a nonprofit our there which does so, but I don't know of one. Fix your credit before trying to borrow. It is highly unlikely that this would be approved by a mortgage underwriter.   When the bank gives a loan with a security interest in a property (a lien), they are protected - if the borrower does not repay the loan, the property can be foreclosed on and sold, and the lender is made whole for the amount of the loan that was not repaid.   When two parties are listed on the deed, then each owns an UNDIVIDED 50% share in the property.  If only one party has pledged the property as surety against the loan, then in effect only 50% of the property is forecloseable.  This means that the bank is unable to recoup its loss.   For a (fictional, highly simplified) concrete example, suppose that the house is worth $100,000 and Adam and Zoe are listed on the deed, but Adam is the borrower for a $100,000 mortgage.  Adam owes $100,000 and has an asset worth $50,000 (which he has pledged as security for the loan), while Zoe owes nothing and has an asset worth $50,000 (which is entirely unencumbered).  If Adam does not pay the mortgage, the bank would only be able to foreclose on his $50,000 half of the property, leaving them exposed to great risk.   There are other legal and financial reasons, but overall I think you'll find it very difficult to locate a lender who is willing to take that kind of risk.  It's very complicated and there is absolutely no up-side.   Also - speaking from experience (from which I was protected because of the bank's underwriting rules) and echoing the advice offered by others on this site: don't bother trying.  Commingling assets without a contract (either implicit by marriage or explicit by, well a contract) is going to get you in trouble. No, 401(k) and IRA accounts are not at risk when you default on a mortgage, even in states that aren't non-recourse. In states where mortgages are non-recourse loans, the bank isn't allowed to go after you at all. They get the keys and whatever they recover from the house sale is it.