Self Employed Mortgage
Self Employed Mortgage
Self employed mortgage options hard to come by especially if tax returns show large business write offs and low income figures. Self employed people are at a disadvantage when it comes to shopping for a home loan for this reason.
If you do not have paychecks, and income tax returns showing large income figures chances are you have been told that you cannot qualify for a loan or have even been declined by a lending institution!
Being self employed and looking for a self employed mortgage can be frustrating. Being self employed has the advantage of being able to write off business expenses to lower the tax liability. Banks and other lending institutions however do not consider this in assessing a loan package from a self employed borrower. They will look at the adjusted gross income line and will use that figure for their calculation. If that number is low because of business write-offs – too bad!
Self Employed Mortgage – Options
First option, make sure you report enough income to cover the required debt to income ratio on the adjusted gross income line of the tax return for two consecutive years (even if that means foregoing write-offs that you may be eligible for) – disadvantage: you will pay higher taxes and will have to wait two years before you can apply for a loan.
Second option, apply for a stated income loan or a bank statement loan. Both these options do not use tax returns for income verification.
- Stated income loans – will used the income stated on the loan application for calculation. A CPA letter stating that the borrower(s) have been self employed for at least the last two years will be required.
- Bank statement loans – this is an alternative income verification loan. Lenders will use the average deposits made into a bank account over 12 or 24 months for income qualification. Deposits made into a personal bank account are used at 100% and those in a business account at 50%.
Advantage: no waiting to apply for a loan and no over-paying taxes by foregoing eligible business expenses.
Our stated income loans and bank statement loans have great mortgage rates and terms. Contact us for more information.
Stated Income Loans
Bank Statement Loans