Getting a Mortgage As a Self-employed Person

[mmike160]

Won't work anyway, he's still self-employed because he owns more than 25% of the entity.
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I haven't wrote a mortgage in 3 years, but just curious as to why...

If a borrower is a principal of a company, paying themself via W2, going full-doc and showing 2 years tax returns for the business and personal, what would the problem be?

 

[Johnnyboy29073]

I haven't wrote a mortgage in 3 years, but just curious as to why...

If a borrower is a principal of a company, paying themself via W2, going full-doc and showing 2 years tax returns for the business and personal, what would the problem be?

I've written thousands and I am here to tell you the person in your scenario will be considered self-employed, and there's no way around it.

 

[mmike160]

I've written thousands and I am here to tell you the person in your scenario will be considered self-employed, and there's no way around it.

I've wrote a lot of loans too...

So what if he's considered self employed? Self employed borrowers can qualify for mortgages too. Since, stated, no docs, NINAs are basically gone, the borrower will need a fulldoc loan. The lender will ask for proof of income. Once the borrower has a minimum history of 24 months (corporate and personal) and falls within the other guidelines this shouldn't be an issue.

 

[Johnnyboy29073]

I've wrote a lot of loans too...

So what if he's considered self employed? Self employed borrowers can qualify for mortgages too. Since, stated, no docs, NINAs are basically gone, the borrower will need a fulldoc loan. The lender will ask for proof of income. Once the borrower has a minimum history of 24 months (corporate and personal) and falls within the other guidelines this shouldn't be an issue.

Read the context of the post.

Self employed folks have a demonstrably more difficult time qualifying, for more reasons I have time to get into.
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Two years filed tax returns, I believe they take the average AGI to two years to determine DTI ratio.

I was told 740 was top tier, but I suppose that would vary by lender. It's not that bad as self employed, just no more "no doc" or funny loans, as previously stated it's all about the documentation.

"Two years filed tax returns, I believe they take the average AGI to two years to determine DTI ratio."


This is factually incorrect.

 

[TXINSURANCE]

It's all about documentation... If you can prove it... And your credit is good... There are very little problems.

Maybe a few more questions or forms than pre Obama but that's about it...

 

[theozellgroup]

I've been self-employed as an independent agent for about 3 years. I'm getting ready to move. I certainly am going to find out from my mortgage broker what he says, but I wanted to find out if any of you guys have any specific experiences/problems with this. There are a lot of "horror stories" about the difficulty self-employed people have with getting a mortgage, especially in the last 2-3 years ("your income level could fluctuate" etc)

Have any of you guys had a problem with it? How many years worth of documentation did you have to have? Did it affect your interest rate or required down payment amount?

Thanks in advance for any help.

Supply your Loan Officer with the last 3 years of taxes (have them scanned into PDF files that you can email. Trust me on this, because half way into the process, especially when you have the property under contract that you are trying to buy as a short sale, you will get a call from the underwriter asking for your 2008 taxes)

Keep at least 6 months of current bank statements and any other investment statements you have on hand (again PDF scans are your friend). Each time you get an updated statement provide your loan officer with a copy of it).

You need to have at least 10% of the sales price you are willing to pay in an account. Listen, do not! I repeat DONOT go into this thinking that you can get a 100% 95% or 93% loan. I don't care if the appraisal comes back 50% higher than your contract price. Banks are scared out of their speedos now and they are very hesitant to loan you any amount of money, no matter how good your credit is.

Do have good credit. In order to get those cute little low rates you see advertised you need at least a 780 credit score.

Don't buy above your financial means. Thats how we got into this mess in the first place.

Good Luck and God Bless

 

[jodieB]

I've been self-employed as an independent agent for about 3 years. I'm getting ready to move. I certainly am going to find out from my mortgage broker what he says, but I wanted to find out if any of you guys have any specific experiences/problems with this. There are a lot of "horror stories" about the difficulty self-employed people have with getting a mortgage, especially in the last 2-3 years ("your income level could fluctuate" etc)

Have any of you guys had a problem with it? How many years worth of documentation did you have to have? Did it affect your interest rate or required down payment amount?

Thanks in advance for any help.

One thing i did was i got online advice as to how to resolve this and their are people who can help and guide you as to what you need to do.

 

[Newby]

I've been self employed for 15 years and on straight commission for 33 years. It has never affected my ability to get a loan or mortgage.

My advice on keeping great credit is to live WELL within your income. Never pay a bill late. Always put a minimum of 20% down on a house and 50% down on a car (if you finance those at all.)
People who pay their bills and live under their means have no problem getting financed regardless of if they own their own business or work for others.

 

[xrac]

If all else fails, incorporate or form an LLC and put yourself on salary.

That's is my set up. I am not self-employed and I have never been self-employed although, I have signed my own pay checks since 1993. I am employed by a corporation in which I happen to be the primamry stock holder.
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I've been self employed for 15 years and on straight commission for 33 years. It has never affected my ability to get a loan or mortgage.

My advice on keeping great credit is to live WELL within your income. Never pay a bill late. Always put a minimum of 20% down on a house and 50% down on a car (if you finance those at all.)
People who pay their bills and live under their means have no problem getting financed regardless of if they own their own business or work for others.

Newby nails it. Keep you finances in order and they will want to lend you money.

 

[sluggo08]

Hi All,

Thought I would chip in here, because I am currently employed as a mortgage banker. (I am a recovering former Allstate Agent...I am on step 5.) Just closed a loan last friday for a self employed person and had no problems. It was a cash out (if you can believe it) 277k loan in Southern California. Mid Fico was 742. You will have no problems getting a loan if you are SE if you can meet the following guidelines.

1. They are going to look at both your AGI and your net income on your schedule C. If you show enough income to qualify for the loan, and your income has not decreased year over year, you will be fine. If you take every writeoff under the sun (I have seen some doozies with insurance agents) then you are probably screwed. The underwriter will take your net income from schedule C then add back in any depreciation that you took and also add back any deduction for a home office, and then take this number for the last two years and divide by 24. This will be the income that they use to qualify you.

2. Don't worry about setting up a LLC to pay yourself W-2, it doesn't make a bit of difference. As someone mentioned here, if you own 25% or more of the entity that pays you, then you are self employed. Even if you own less than 25% they are going to scruntinze the heck out of you.

3. You should have at least 6 months reserves for the total mortgage payment, (you should have more) This does not apply to FHA loans.

The good news is that many banks are loosening the guidelines for SE, so there is some light at the end of the tunnel.