home loan qualifications and the self employed | TigerDroppings.com

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gsvar2004
LSU Fan
Deep in the woods
Member since Nov 2007
1095 posts

home loan qualifications and the self employed



can anyone tell me about the qualifications for the self employed person wanting to get a new mortgage.

my wife is a teacher and i have been self employed for right at 2 years and we want to upgrade to a bigger house maybe with a baby on the way, but im concerned about my position and what we will need paperwork wise to qualify for a new homeloan. We currently own a home FWIW.







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LSURussian
LSU Fan
Baton Rouge
Member since Feb 2005
84448 posts

re: home loan qualifications and the self employed


Tax returns with your Schedule C for 3 years or so most likely.





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LSUGUMBO
New Orleans Saints Fan
Shreveport, LA
Member since Sep 2005
5166 posts
 Online 

re: home loan qualifications and the self employed


You will need to prove self-employed income for 2 years, so it sounds like you picked the right time, although you might have to wait until you file 2012 taxes. Depends on how much of a stickler your lender is.





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VABuckeye
Ohio State Fan
Oak Hill, VA
Member since Dec 2007
11919 posts
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re: home loan qualifications and the self employed


It's been awhile but I believe they're going to be looking at AGI for a self-employed borrower. If you write off a boatload of your income you won't be getting it back to qualify for the loan.





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lsu tigerdog
LSU Fan
Baton Rouge
Member since Nov 2007
128 posts

re: home loan qualifications and the self employed


being self employed, the lenders want to see 2 yrs complete tax returns, personal and business plus any schedules on your returns.the lender will average out your income for last 2 yrs,
most important question, do you show losses on your returns??






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gsvar2004
LSU Fan
Deep in the woods
Member since Nov 2007
1095 posts

re: home loan qualifications and the self employed


no losses.





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lsu tigerdog
LSU Fan
Baton Rouge
Member since Nov 2007
128 posts

re: home loan qualifications and the self employed


i'm a mtg broker here in baton rouge, if you like, call me when you get a chance, it'd be great to earn your business, 225.291.7901 x 224.
since you have no losses,you should be fine, the most important thing is just reviewing your returns for 2010 & 2011






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GFunk
LSU Fan
Denham Springs
Member since Feb 2011
8860 posts

re: home loan qualifications and the self employed


They'll ask for bank statements, and more than likely give you a percentage of those as you gross income.

Tough to go conventional if you're writing stuff off.






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gsvar2004
LSU Fan
Deep in the woods
Member since Nov 2007
1095 posts

re: home loan qualifications and the self employed


yeah gfunk im finding that out.





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yellowfin
Illinois Fan
Coastal Bar
Member since May 2006
72677 posts

re: home loan qualifications and the self employed


Do you take into account things like bonus depreciation or sec 179 when you figure income for self employed? I have a loss but it includes about 65k of depreciation in 2011





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GFunk
LSU Fan
Denham Springs
Member since Feb 2011
8860 posts

re: home loan qualifications and the self employed


You ought to bite the bullet and pay yourself a salary or pay yourself by the hour somehow. Maybe an S-Corp and name yourself an employee? I'm no tax expert but I ran into this back in June myself. I had an LLC that I expensed some things to in order to lower my tax bracket. They used my W-2'd income at first, and then when I submitted tax returns, they had to use my AGI (Adjusted Gross Income).

I ended up dissolving the business through the SOS office. The write-offs I was using it for weren't worth my inability to get approved for a home loan.

Best of luck.






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yellowfin
Illinois Fan
Coastal Bar
Member since May 2006
72677 posts

re: home loan qualifications and the self employed


I'm not financing anything major anytime soon but I am set up and an S corp, I pay myself a very small salary





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VABuckeye
Ohio State Fan
Oak Hill, VA
Member since Dec 2007
11919 posts
 Online 

re: home loan qualifications and the self employed


You can be an LLC and still receive a W2. You just have to file a form to be treated as an S Corp when you file. That's what I do every year. Note that my LLC is for earning income and not for writing off losses.

Still, to get a mortgage I'd have to supply personal and business tax returns and my income for borrowing would be based off of my AGI.



This post was edited on 12/11 at 9:09 am


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novabill
LSU Fan
Crossville, TN
Member since Sep 2005
6246 posts

re: home loan qualifications and the self employed


2 yrs tax returns





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Shankopotomus
New Orleans Pelicans Fan
Brian Roberts Fan
Member since Feb 2009
18321 posts

re: home loan qualifications and the self employed


Always been one of the disadvantages of being self-employed

With all of the good things you can do with depreciation, expenses, accrual accounting etc. - the downside is if you show too little income on your tax return you may have a difficult time obtaining a loan.

Catch-22 it seems in a way






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gsvar2004
LSU Fan
Deep in the woods
Member since Nov 2007
1095 posts

re: home loan qualifications and the self employed


yeah the point im at now is claiming more 2012 to bite the bullet to qualify for a bigger loan. im gonna have to wait till march or so it seems now.





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VABuckeye
Ohio State Fan
Oak Hill, VA
Member since Dec 2007
11919 posts
 Online 

re: home loan qualifications and the self employed


They're going to average your income over the two year period. That is a given.

IOW, as a self employed borrower the mortgage lender will take the worst possible scenario when they calculate your income.






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