Is a minimum down payment required for self-employed borrowers?

There are several new loan programs available today. Lenders are doing their best to qualify people with the lowest rates, lowest down payment, highest qualifying ratios, and the fewest verifications and documents. Most loan programs have the same requirements for different types of employment. Programs are available for first-time home buyers, move-up buyers, or investors—regardless of their employment.

What if a borrower can't qualify because tax write-off amounts decrease his new income too much.

This is a common problem among self-employed borrowers. They are making enough money to pay the new mortgage and they have had steady income for years, but tax write-offs lower their reported income. Despite their income, they get penalized when they want to buy a house. They don't qualify! Lenders look to see if the borrower has enough independent income to pay the mortgage and other debt obligations. New income from their tax return is not the final determining factor. The tax returns need to be reviewed and analyzed carefully. Some tax write offs can be "added" back to the new income. If the new amount does not qualify the borrower, no income verification loans or "no doc" loans may be very viable options. Consult Andrews Mortgage Solutions for loan details!.

How many tax returns should be used to arrive at the average qualifying income?

It's best to use two years of tax returns. This will stabilize the fluctuations in cash flow that may occur due to the normal ups and downs in many businesses. If an analysis of tax returns shows that the applicant has a pattern of reasonable increases in income each year, it makes sense to use the most recent year's tax return alone. A reasonable increase would be in the range of 10 to 20% per year. An increase of 40 to 50% in one year over the past year is not a reasonable increase and may well represent some sort of windfall to the business that may not be maintained over the long term. A 24-month average would then be more logical to stabilize the income. Remember, common sense prevails in most of these decisions.

What about newly self-employed applicants?

Newly self-employed applicants represent a special situation. The cliché, the first year you take all your clients with you, and the second year you go out of business, rings true with many underwriters. It is my job to make a very strong case to the contrary. Verifying previous employment helps to determine a track record of skills, length of employment, and work attitude. The previous income helps establish the financial history, as well as indicates whether the move to self-employment represents logical progress or a complete departure from an established profession.

Things to Remember

• If you, the self-employed borrower, recently had a bad year but had previous successful years, qualification is still possible.
  
  
• A bad year may result from several causes—divorce, death, or medical illness. This could happen to anyone at any time. If the business had previous successful years, don't assume that you won't qualify for a mortgage loan!

How to Begin

Don't trust this important transaction to just anyone! Andrews Mortgage Solutions has qualified Home Loan Specialist that have expertise in analyzing tax returns to qualify self-employed people. They can tell you exactly what documents you will need for your particular case. There is an art to getting these loans approved, so not just any mortgage loan officer will be able to help you get qualified at the best possible interest rate.

Conclusion

You must be willing to spend some time working with me to qualify for your mortgage loan if your particular situation does not fall within the "standard" guidelines. We are willing to spend the extra time and effort to correctly qualify self-employed people. Careful review of tax documents cannot be done accurately over the phone. There is too much room for error. Qualifying self-employed borrowers correctly—the first time—will save everyone time, money, and frustration.

Andrews Mortgage Solutions will work aggressively to qualify people. A variety of loan programs allows us to fit the cash flow and ownership needs for each borrower. We specialize in qualifying self-employed borrowers and can provide you the best opportunities for loan approval.