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Old 09-15-2013, 07:43 PM
 
385 posts, read 354,625 times
Reputation: 1019

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I will be purchasing a home and am considering getting a mortgage. I am self employed, so I know that conventional financing is more difficult.

I'm looking for any ideas where to look for a lender. Do I look for a particular lender or a loan officer with experience with these type of loans?

Type of lender? Conventional, FHA, portfolio?

Basic info:

Credit scores: 666, 720, and 767 (3 bureaus)

Down payment 20% - 30%

No debt

Additional savings to support 8-12 months expenses

Anticipated monthly payment about 20% to 25% of gross monthly income.

Working for the same company for 10+ years, but I am an independent contractor and receive a 1099

The last time I applied for a mortgage was over 20 years ago and it was a nightmare. So, I'm hesitant to start the process again.

How hard is it these days for the self employed?

What extra documentation can I expect to provide?

Any input is appreciated.

Thanks
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Old 09-16-2013, 08:23 AM
 
4,626 posts, read 7,197,499 times
Reputation: 4735
The banks will not be booking at your gross monthly income since you are 1099. They'll be looking at your net profit figures because of your writeoffs.

Been there...done it...it is awful qualifying.
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Old 09-16-2013, 08:37 AM
 
Location: Phoenix, AZ > Raleigh, NC
14,297 posts, read 17,497,824 times
Reputation: 22122
Something is off with those credit scores. They really shouldn't be more than roughly 20 points different than each other. Before doing anything else, pull those reports and find out why they are so different. And get it corrected.
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Old 09-16-2013, 11:04 AM
 
Location: Bloomington IN
5,862 posts, read 7,085,877 times
Reputation: 14078
Get ready to share your business tax records in addition to your personal tax records. They may want to see personal and business bank statements for 2-3 years.

We've been through several mortgages as self-employed persons. We've used big banks, mortgage brokers, and smaller community banks. We found the process easiest with a good mortgage broker and a locally owned bank. The local bank did plan to sell the loan, but they knew how to work through the process with the minimum amount of headache. Same applied to the mortgage brokers we've used.
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Old 09-16-2013, 11:07 AM
 
Location: New York
2,251 posts, read 4,161,023 times
Reputation: 1607
Quote:
Originally Posted by ocngypz View Post
The banks will not be booking at your gross monthly income since you are 1099. They'll be looking at your net profit figures because of your writeoffs.

Been there...done it...it is awful qualifying.
What ocngypz" is referring to is a profit n loss statement. Showing your gross income and your net income.

It's easy - you can create your own profit n loss statement (should take about an hour).

Download to your desktop from your online checking, save 12 months of bank statements in PDF format. Create a folder and save (later you are going to be emailing the PDF files later with the completed PnL to your loan officer).

Below is a link to a generic profit n loss statement you can edit to create your own PnL statement. If you see an expense use it, if you don't have that expense delete it. If you have an expense not listed, add it.

At the top from left to right - each month list the total deposit for the respective month. This is your gross income. What you spend monthly pertaining to earning money, list has a monthly expense. Below that each month subtract expenses from your gross to show your net income.

http://profitandlosstemplates.com/wp...s_Cleaners.xls

What you said about you credit, debt and loan to value ratios, recommend dealing with a direct lender. Since you are putting 20 to 30% down, go for a conventional loan. Conventional lenders have different loan packages you could qualify for. As long as your credit report doesn't show any derogatory information you should be OK. Banks are going to what to look at the last two years of tax returns.

Don't look at credit unions, because if any issue comes up your application is dead. Stay away from a brokers to avoid higher closing costs. You don't need an FHA loan because of your credit and down payment - with this type of loan your facing life time mandatory mortgage insurance that only benefits the bank.

Make sure the funds using for the down payment are seasoned, meaning it's been in your account for at least 6 months.

Many first time buyers make the mistake by finding the house first before the loan. I recommended speaking to a bank first, that way you know your purchasing power.

Good Luck....
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Old 09-17-2013, 07:34 PM
 
385 posts, read 354,625 times
Reputation: 1019
Quote:
Originally Posted by Modification Specialist View Post
What ocngypz" is referring to is a profit n loss statement. Showing your gross income and your net income.

It's easy - you can create your own profit n loss statement (should take about an hour).

Download to your desktop from your online checking, save 12 months of bank statements in PDF format. Create a folder and save (later you are going to be emailing the PDF files later with the completed PnL to your loan officer).

Below is a link to a generic profit n loss statement you can edit to create your own PnL statement. If you see an expense use it, if you don't have that expense delete it. If you have an expense not listed, add it.

At the top from left to right - each month list the total deposit for the respective month. This is your gross income. What you spend monthly pertaining to earning money, list has a monthly expense. Below that each month subtract expenses from your gross to show your net income.

http://profitandlosstemplates.com/wp...s_Cleaners.xls

What you said about you credit, debt and loan to value ratios, recommend dealing with a direct lender. Since you are putting 20 to 30% down, go for a conventional loan. Conventional lenders have different loan packages you could qualify for. As long as your credit report doesn't show any derogatory information you should be OK. Banks are going to what to look at the last two years of tax returns.

Don't look at credit unions, because if any issue comes up your application is dead. Stay away from a brokers to avoid higher closing costs. You don't need an FHA loan because of your credit and down payment - with this type of loan your facing life time mandatory mortgage insurance that only benefits the bank.

Make sure the funds using for the down payment are seasoned, meaning it's been in your account for at least 6 months.

Many first time buyers make the mistake by finding the house first before the loan. I recommended speaking to a bank first, that way you know your purchasing power.

Good Luck....

Thanks for the P & L link.

I glad you mentioned credit unions, I was considering that.

I'm still looking for owner finaning and possibly hard money, or maybe selling another property and paying cash. I don't know if I'm ready for the aggravation of applying for a traditional mortgage. But, it's nice to know that it may be possible.

I appreciate the input from everyone.
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Old 09-18-2013, 11:35 AM
 
3,317 posts, read 7,253,255 times
Reputation: 4095
Quote:
Originally Posted by thebigW View Post
I will be purchasing a home and am considering getting a mortgage. I am self employed, so I know that conventional financing is more difficult.

I'm looking for any ideas where to look for a lender. Do I look for a particular lender or a loan officer with experience with these type of loans?

Type of lender? Conventional, FHA, portfolio?

Basic info:

Credit scores: 666, 720, and 767 (3 bureaus)

Down payment 20% - 30%

No debt

Additional savings to support 8-12 months expenses

Anticipated monthly payment about 20% to 25% of gross monthly income.

Working for the same company for 10+ years, but I am an independent contractor and receive a 1099

The last time I applied for a mortgage was over 20 years ago and it was a nightmare. So, I'm hesitant to start the process again.

How hard is it these days for the self employed?

What extra documentation can I expect to provide?

Any input is appreciated.

Thanks
Add the numbers on Line 31 of your Schedule C in your 2011 and 2012 taxes and divide by 24. Cut that number in half. If you truly have no credit report debt, that number is your maximum house payment, including taxes, insurance, and HOA.
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Old 09-18-2013, 02:34 PM
 
Location: Chicago
2,883 posts, read 3,842,668 times
Reputation: 2743
I am a loan processor and I don't think you'll have a lot of trouble if the scenario you gave is accurate and you don't have a lot of other debt. If you are self-employed, you do have to watch your write-offs. One of my loan officers gave me some tax returns to look at and the borrower claimed losses, as in negative total income 2 years straight. That just doesn't fly. If you don't declare it, you can't use it as qualifying income.
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Old 09-18-2013, 05:28 PM
 
385 posts, read 354,625 times
Reputation: 1019
Thanks, that gives me hope that I might be able to get a mortgage.

If income is the major stumbling block for the self employed getting a mortgage, then I'm OK. I'm estimating the 20% to 25% of my income, after business expenses.
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Old 09-18-2013, 05:38 PM
 
Location: The Triad (NC)
26,844 posts, read 57,851,863 times
Reputation: 29235
Quote:
Originally Posted by thebigW View Post
If income is the major stumbling block for the self employed getting a mortgage, then I'm OK.
Income affects everyone.
PRESENTING that income in a manner the lender will accept is the stumbling block.
Sit down with your CPA to prepare the documents and supporting data.
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