How Business Deductions Could Keep You From Getting a Loan Entrepreneurs looking to buy a home or take out a home equity line of credit may face some challenges.

A steady income stream, a FICO score higher than 780 and an asset base that exceeded the desired mortgage amount: My loan approval should have been straight-forward, right? Unfortunately, it wasn't.

While applying for a home equity line of credit, I experienced a snag. My tax strategy of maximizing my business deductions has cost me access to my home's equity—capital I was hoping to diversify. I was penalized despite the fact that a notable amount of my business's expenses were paid from an asset—a corporate savings account—not from revenue.

My scenario is no surprise to Kory Kavanewsky, branch manager and senior loan officer at CMG Financial in Coronado, Calif. "The home-buying process has become increasingly challenging for the self-employed," he explains. "That's because while business deductions sound like a great idea during tax season, they are almost always counted against you when qualifying for a loan."