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Self Employed and Getting a Mortgage? This is something you'll want to know.

Monday, February 11, 2013 - Article by: JoshL - Gold Star Financial - Message

Self Employed and Getting a Mortgage? This is something you'll want to know.

With the changes in the mortgage/financial industry over the past few years, every new borrower needs to have full documentation proving their income. That's not typically an issue unless you're self-employed. As anyone owning a business knows, writing off as much as possible helps ease tax burdens. This is great, until you start an application for a new home purchase or refinance.

What self-employed borrowers don't know is that for 99% of the loan programs, underwriters are going to look at your tax returns for the past 2 years and average the net income out. So, let's say in 2011 you brought in $100,000 annual gross receipts from your business - but you had so many write-offs for the business that it brought your income down to $10,000. Then in 2012 you brought in $125,000 but after write-offs claimed your income was $15,000. The underwriter will look at 2011 and 2012's income and average it. So if you "made" $10,000 in 2011 and $15,000 in 2012, your average annual income for the past 2 years would be $12,500. Typically, this is going to be a deal-breaker for home financing.

Guess what? We have one of the few loan programs in the country that are perfect for this scenario. This program allows us to use your financial assets as your income and you don't need a history of withdrawals from the asset account! So if you're self-employed, write off as much as you can for tax purposes but have financial assets, there's an option for you.

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