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Self employed and looking to upgrade to a bigger home

It’s time to upgrade our home since the family is growing. I have two teenagers, a preteen and a toddler right now and our current home doesn’t have enough space for us all. I have been self employed for the past 3 years and I want to know how income is looked at for self employed borrowers. Current home balance is $32k and worth around $95k right now. We plan to sell it eventually, thanks for the inputs. by rkobes272 from Glendale, California. Feb 18th 2022 Reply

David R Youngs - Mortgage Advisor (DavidRYoungs)
#63 ranked lender in Minnesota - 87 contributions

Being self-employed can sometimes be a challenge with underwriting, because of the many income tax write-off's that these individuals have at the end of each year. Even if a person grosses over $1,000,000 in a year, sometimes the net profit to the business may be minimal, or even show a loss after expenses. You also usually need 2 years of self-employment, in order to be eligible to use ANY income towards qualifying for a home loan. In your case, if you have 3 years of history with your business and you show a reasonable business profit at the end of each year, then you may have a good chance at qualifying for a Conventional or Government loan without any issues. In most cases, the lender will require 2 years of tax returns including all schedules, your most recent "profit & loss" statement, a CPA/Attorney letter verifying the businesses total time in business and the fact it is still in operation, an active website or business license to show validity as well. With COVID's impact on so many businesses these past years, there are situations that the underwriters may need to see additional documentation as well, such as 3 months business bank statements to show recent income deposits, which would support your profit and loss statement. In the event that you do NOT show sufficient profit for your business, this doesn't necessarily prevent you from getting financing for a home loan. There are many programs outside of the traditional lending programs, which fall into the "Non-QM" area (these are sometimes also called by other names such as "Non-Prime, Alt-Doc, Portfolio" and more). Many of these programs have easier and different ways of verifying a self-employed person's credit-worthiness, such as using 12 or 24 months of bank statements, to average out business deposits instead. All of this being said, the first thing you'll want to do is speak with a reputable & licensed mortgage professional, who is well versed in self-employed income options and if needed, access to some of these "Non-QM" lending products. If you have any further questions, feel free to reach out anytime for a conversation at 651-356-7100 or email us at License #328679 Thanks for the question!

Feb 21st 2022
Bert Carpenter (BertCarpenter)
#37 ranked lender in Arizona - 2,431 contributions

Essentially, underwriters want to see sufficient net income (before income taxes, but after self-employment and Medicare taxes) from the business to cover all your personal expenses. You have been in business 3-years, which is more than the minimum. Depending on the lender you choose and the program, the underwriter will average the last two years of income, but we have programs that only use the last year's income. Since most tax professionals see their role as minimizing your income for income tax purposes, sometimes there is not enough net income left over to meet underwriting guidelines. A conversation about your tax strategy and qualifications should be had before you complete and file your 2021 business returns. The best advice I can give you is to connect with a licensed Mortgage Professional broker (like myself) and begin the process.Bert Carpenter, The LoansA2z Team of NEXA Mortgage ~ NMLS 40586 ~ Certified Mortgage Advisor and Certified by The National Association of Mortgage Professionals as a Certified Veterans Lending Specialist.Licensed in AZ, CA, GA, IL, MO, OR & WA. FL & TX coming soon In fact, NEXA is licensed in all states except MA and NY so give us a call. ~ 480-889-9000 - OR - 480-695-9300.

Feb 24th 2022
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