Do you still have enough income to qualify for a loan if we use your after-tax (well, certain deductions like home mortgage interest are okay). Besides self-employed borrowers, we also see this situation with people who are W2 employees, if they deduct significant amounts of "2106 expenses." These are no-reimbursed business expenses, for things such as uniforms. This is why it is imperative that the loan officer get a copy of the client's taxes up front, rather than waiting until the lender is ready to draw docs and pulls the client's taxes after everyone has put a lot of work into a transaction.
Read on to see how the self-employed have challenges qualifying for a loan in this full doc environment... You can also read What It Means to Go Full Doc for a detailed explanation of what a borrower needs to show to qualify for a loan as of March 2010.
Here is the scoop on buyers who write down their income on their taxes:
We are all happy to have buyers when we get them. All buyers are equal but some are more equal than others. I have a buyer who is self-employed. He owns a successful business and does quite well income wise. However, he writes off his income to the point that he is making below the poverty level. This is fine for his taxes, not so good for qualifying for a mortgage.
My husband is a mortgage lender and took a look at the tax returns. This individual is not going to qualify for a car much less a home based on his tax returns. I just wonder what people are thinking these days when it comes to getting a mortgage. He told my husband he wanted a stated income loan. Well we are about 2 or so years too late for that one. I just hate it that a person with great income is unable to buy a home due to how he does his taxes. Maybe he will change the way he pays himself but that does not help anytime soon. It is frustrating trying to help self employed folks get into a home these days. Very few of them show enough income to qualify.
Lisa Delzompo (951-704-4559)
"May your home always be too small ... to hold all your friends!"
CA Dept of Real Estate, Real Estate Broker License #01379811;
NMLS Identifer #331744
REAL ESTATE: www.SandToSeaProperties.com. Covering northern San Diego, Oceanside, Temecula, Murrieta, Riverside County and desert areas of Yucca Valley, Joshua Tree and Twentynine Palms, CA.
LOANS: PRW Lending, Inc. Call direct 951-704-4559, or email me at lisa(@)sand2sea.us
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