Getting a Mortgage As a Self-employed Person

[alldaytuesdays]

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.

 

[sman]

You generally need to provide two years of tax records and they will average the income from those two years to use toward qualification.

Of course, over the last couple of years that could have changed drastically. But I would assume as long as you have a high enough credit score (at least 720) and enough documented income, then you should be able to go with the standard rules that apply to those with W2 income.

 

[Larry Tew]

Yep, it's all about documentation.

 

[TXINSURANCE]

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.

 

[Full Throttle]

Besides your averaged AGI, how much do you have in the bank account? (no need to answer) That will come into play as well. Also, are you married and does your spouse have a steady income? I expected to have some difficulty qualifying for the amount I wanted last year, but it was much easier than expected.

 

[BNTRS]

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

 

[aimo]

It's a myth that credit worthiness affects your rate in the home mortgage market. Certainly businesses and commercial mortgages will be graded up for riskiness, but in the residential market either you're credit worthy or not, and once you clear that threshold it's all based on what your loan officer can 'sell' you...

Yes, two years of info and a few months of your most recent bank statements will be required.

Just as important as your income is how much of that income is going towards current debt payments. If you're on the margin and have an expensive auto loan/lease, I'd suggest you downgrade your auto for the moment. Your debt to income can be a dealbreaker for self employed. In the current market too, they're discriminating against self employed by having harder regs. By no means is it impossible or even difficult to get a mortgage as a self employed person, I'm just saying they've ratcheted up their credit standards in that market.

You won't know until you see, and your loan guy will tell you all the documents you need, he'll be just as eager to get the deal done as you. Also, if you want to really get tough, be sure to get TWO (or more) loan officers bidding for your deal, unless you like this guy and want to play nice. Rates are negotiable - always.

Source: I work closely with a mortgage banker on referral exchanges.

 

[mmike160]

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

That wouldn't work until the corporation has a 2 year history of income..

 

[TXINSURANCE]

Correct. It's back to basics on mortgages. If your credit is responsible, your income reliable, and your assets variable - there is no problem.

 

[Johnnyboy29073]

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

Couldn't be wronger, for more reasons than I have time to get into.
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That wouldn't work until the corporation has a 2 year history of income..

Won't work anyway, he's still self-employed because he owns more than 25% of the entity.
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Correct. It's back to basics on mortgages. If your credit is responsible, your income reliable, and your assets variable - there is no problem.

This is a distortion of the truth.

Its not quite that simple.