Self Employed Mortages

KPatterson · May 30, 2017

Does anyone have experience in this field? I have been self employed for 4.5 years now. Banks will loan me money at a substantial interest rate. For obvious reasons taxes show very little income. Credit is great., debt to income ratio is great. I refuse to pay a 5.9 interest rate being that I'm self employed. Has anyone used a lender that specializes my circumstance?

jccarter1 · May 30, 2017

I dealt with this for a few years and you will need to just bite the bullet and show some income for 2 years or if you can find a local bank that possibly knows your business and will take that into account. Even with the local bank most of them won't have the low mortgages rates that national lenders offer.

GSI · May 30, 2017

Good luck. Seems like a lot of times we get penalized for being self employed. From the view of the bank, we're a higher risk and may not have much money. Wish I had a good answer for you. I went through this myself about 4 years ago. Some days a 9 to 5 looks mighty tempting.

kody29 · May 31, 2017

KPatterson said:
Does anyone have experience in this field? I have been self employed for 4.5 years now. Banks will loan me money at a substantial interest rate. For obvious reasons taxes show very little income. Credit is great., debt to income ratio is great. I refuse to pay a 5.9 interest rate being that I'm self employed. Has anyone used a lender that specializes my circumstance?

Hey man I can help this is what I do for a living my mom owns a branch of a mortgage company shoot me a text and I can go over more info with you 409 392 5010.

customcj7 · May 31, 2017

Where are you located?

Like KPatterson, the MIL is top **** at a Mortgage firm and she basically takes your info and she'll source the best loan on your parameters. She'll know right off the bat what she needs from you to get the best info and she can tell you that info. The reality is, you're probably going to need to provide a bit more information around income.

KPatterson · May 31, 2017

customcj7 said:
Where are you located?

Like KPatterson, the MIL is top **** at a Mortgage firm and she basically takes your info and she'll source the best loan on your parameters. She'll know right off the bat what she needs from you to get the best info and she can tell you that info. The reality is, you're probably going to need to provide a bit more information around income.

I'm in Buford. Northeast Ga. I can provide proof of income, it just wont be in a form of tax records.

KPatterson · May 31, 2017

GSI said:
Good luck. Seems like a lot of times we get penalized for being self employed. From the view of the bank, we're a higher risk and may not have much money. Wish I had a good answer for you. I went through this myself about 4 years ago. Some days a 9 to 5 looks mighty tempting.

I`ve never had a 9-5. I like the flexibility of making my own hours. But damn you are right. Sometime a 9-5 does seem appealing.

grcthird · Jun 1, 2017

I'm in the same boat, don't have to sell and move but been wondering how I would qualify for a loan owning a business that doesn't show much of a profit for obvious reasons. I was thinking that I was screwed and going to be in my house forever, nice to know there are options for this.

ridered3 · Jun 1, 2017

From a financial perspective, can you put together a Profit and Loss Statement (or any other kind of Excel based spreadsheet) that shows Income and Expensese before any Claimed Tax Write Offs that go to the Feds?

Meaning just show your Income and regular Expenses for the business but leave off Tax Credits Carry-forward losses from prior years, Equipment Depreciation, etc.

KPatterson · Jun 1, 2017

ridered3 said:
From a financial perspective, can you put together a Profit and Loss Statement (or any other kind of Excel based spreadsheet) that shows Income and Expensese before any Claimed Tax Write Offs that go to the Feds?

Meaning just show your Income and regular Expenses for the business but leave off Tax Credits Carry-forward losses from prior years, Equipment Depreciation, etc.

Absolutely, that's what one broker told me to put together. Billing and finances is what I hate he most about running my own company.

ridered3 · Jun 1, 2017

Good deal. When I was working in Financial Accounting most of our self-employed clients had two sets of Financials/Books. One for Tax Purposes (generally showed a Loss or small profit) and one for Lending purposes (generally showed that the business was healthy, which was accurate).

Rockwells607 · Jun 1, 2017

im in the same shoes, been thinkin about going full time for myself and can afford to do it now, have the business, im a legal business but show almost no income cause I deal in cash mostly, being said, Im not sure how to show income or how much to show when I wanna get a loan or something...ill keep an eye on this thread

KPatterson · Jun 1, 2017

ridered3 said:
Good deal. When I was working in Financial Accounting most of our self-employed clients had two sets of Financials/Books. One for Tax Purposes (generally showed a Loss or small profit) and one for Lending purposes (generally showed that the business was healthy, which was accurate).

That's interesting, how do you decipher the two?

jccarter1 · Jun 1, 2017

I was told by a mortgage broker that the national lenders (aka the ones that have the lowest rates and the ones who will buy and sell your mortgage) only use taxable income as financial proof bc mortgages get bought and sold so much they have to have a common way to show that it is a strong loan. But if there is ways around this I really would be interested bc I could show more loss on the farm and business if that was the case and still feel good about credit line

adamp · Jun 1, 2017

Pay yourself a salary, make it count. There is no real penalty for being self employed. The penalty for washing the books is you aren't a qualified borrower. You can assemble whatever you want but the problem is it still tells the truth. Being self employed you need to have borrowing in mind long before you need to borrow or you need a business that makes you so much cash you can buy whatever you want. You're not really doing anything wrong, or something we haven't all done, it just has its consequences in my opinion.

ridered3 · Jun 1, 2017

KPatterson said:
That's interesting, how do you decipher the two?

Basically my former employer had an Excel Template he used for most clients with built in formulas so that when you entered data into Tab1 it automatically pulled it into Tab2 so you didn't have to enter everything twice.

Tab1 had all the Tax Write Offs for the specific client (Loses, Depreication etc) and was used for Tax Returns.

Tab2 showed straight Income and Expenses for the business, but did not show all the tax stuff.

The nuts and bolts of their business was the same and accurate, but the ending Net Income/Loss was different based on how many write offs etc.

These clients were pretty well established in terms of lending via Lines of Credits as well as taking salaries etc out off the top.

While this method works, I didn't care much for it since it was legal, but messy at times too.

ridered3 · Jun 1, 2017

jccarter1 said:
I was told by a mortgage broker that the national lenders (aka the ones that have the lowest rates and the ones who will buy and sell your mortgage) only use taxable income as financial proof bc mortgages get bought and sold so much they have to have a common way to show that it is a strong loan. But if there is ways around this I really would be interested bc I could show more loss on the farm and business if that was the case and still feel good about credit line

The two books was used for local banks with long time relationships, so the local banks had more leverage/wiggle room than a national bank would. This was in 2012, so I would have figured all banks were still pretty tight fisted, but that didn't seem to be the case.

Hopefully all of this is clear as muddy water.

grcthird · Sep 27, 2018

Bumping this back up, we finally found a house we both like and of course my reported income is screwing us.

Anybody come up with anything else?

rockwell 1 · Sep 27, 2018

its not so much self-employment its that you are not reporting your true income, what do you expect . loan companies always go by tax records
put more money down lenders love that

Markrobinson · Sep 27, 2018

rockwell 1 said:
its not so much self-employment its that you are not reporting your true income, what do you expect . loan companies always go by tax records
put more money down lenders love that

Some will perceive this as a dickish answer, but that's it. I quit hiding money after a couple years because it was too much of a headache. I charge the same all the time and very seldom take cash and if so I report it.

We bought a house 1.5 years ago and got a 4% rate and had no issues with the self employed stuff.

I worked for some shady MFers for many years and always assumed that was just how business was, but it's only shady if you make it shady.