Loans for the self-employed hard to get? (2009, approved, credit)

[Scientifik]

Throwing my hat into the same ring. (200k loan $20k down) a local broker basically said wait till 2010, file my 09 taxes with very few deductions (meaning I'd pay an arm and a leg in taxes) and work from there. It was discouraging to say the least, I have good credit, a strong business, low debt, no kids, etc etc. I called Bank of America and told them what the deal is and the guy said maybe they could do something, I applied over the phone and its processing. I wish banks would look at your RENTAL history to see what you could afford, shouldn't that carry some weight?

[glenn_1000]

I wish they would look at rent, because my rent is twice what my mortgage will be. So I'm really looking forward to saving some money, now just need a house. One thing I heard is that on some deals, like short sales, the sellers bank might make you do a loan approval with them too. It is hard enough finding a broker to give you a loan, now you may have to get another bank to also agree.

[glenn_1000]

I came up with some information to help getting a loan.

There are expenses that underwriters will add back in when determining your income off of your tax returns. Here are the most common:

* depreciation
* business use of home (such as a home office)
* casualty losses dues to theft, fire or natural disasters
* loss carryovers from prior years
* business vehicle mileage
* one-time extraordinary expenses

If you have not filed your 2008 tax yet, try to maximize these deductions where possible. You can also file an ammended return before Oct 15.

For me I had been writing off some expenses directly on the Sch C when I could have listed them on form 4562. The section 179 amount has been going up to help the self employed, use this so that the entire deduction can be claimed in one year rather than over several years. I read that even things like a printer, mouse, keyboard can be written off on form 4562. And certainly items like computers, software, office furniture, machinery, equipment, etc... I used to only list large items in section 179 and the rest itemized on Sch C Part V -other expenses, but the underwriters are not going to add back the deduction if it is not deducted in one of the catagories listed above.

here are two articles that can help:

Mortgage Processing Blog :: Self-Employment Made Easy – Part 1 of 2

VA Home Loans for Self-Employed Veterans | VA Loans & FHA Loans


Here is the form some underwriters will use. Fill this form out yourself to see what your total income will be:

FannieMae
Self-Employed Income Analysis
http://www.wilenskycpa.com/Self-Empl...20Anaylsis.pdf

It is not to late if you are having problems getting a loan because of your AGI. Make sure you maximize allowed deductions properly. You can file an amended return this year if you already filed, and then in January file your 2009 return and apply for a loan. Home prices should still be low.

[glenn_1000]

I closed on my house, yay!

Locked in at 4.75%. I was worried it would not go through and I'd have to start over at a higher rate.

My broker had to switch lenders during the closing process. First lender would have locked in at 4.625% but declined based on 2 year average income. He went to another lender that only looked at last years income.

Even though my sales for 2007 and 2008 were the same, I re-invested all my extra money back into the business in 2007 taking my AGI way way down. In 2008 I had more personal spending like paying off two credit cards, this made me pay more tax in 2008, but it also brought my AGI way up that allowed me to just barely get the loan approved.

So now my mortgage payment will be less than half of what I had been paying in rent. My rent was going up in 2010 and would have been triple what I will pay now.

Hope this thread helps someone else self-employed to buy a house. Look at your taxes now. If you want to raise your 2009 AGI, pay off some credit cards this year or cut back on some write-offs. Just putting money in the bank will raise your AGI, and whether you pay off debt or save cash, it will help you buy your house.

[KaraG]

Thank you so much for the update and tips. Congrats on making it happen!

[mckeesport_alum]

Glenn,

May I ask what financial institution you used and about what percentage of AGI they gave you? I'm in a similar situation as you and the OP. I own an s-corp (online retail) and my AGI for 2008 was $85k. 2006 was just OK, 2007 was better at $67k. I haven't checked my credit within the last year but I'd expect it to be in the 700 - 750 range. Thanks and good luck with your business and new home!

[mckeesport_alum]

Woohoo! Just got my pre-approval from Wells Fargo on a conventional 30 year loan at 5.5%. I was approved for about 2x my AGI. The lenders must be loosening their belts...

[Trogge]

Originally Posted by mckeesport_alum

Woohoo! Just got my pre-approval from Wells Fargo on a conventional 30 year loan at 5.5%. I was approved for about 2x my AGI. The lenders must be loosening their belts...

Not loosening their belts at all. It's pretty simple, if you claim/show sufficeint income you can get a loan.

[REIRehabber]

Originally Posted by Trogge

Not loosening their belts at all. It's pretty simple, if you claim/show sufficeint income you can get a loan.

Is there any update on the liquidity of the mortgage industry? Have they loosen up lending criterias for self employed borrowers? I wish they hadn't takin away the stated and no doc loans from good standing citizens. Practically have to jump through hoops and hurdles these days. I did hear that later this year or next, we will see stated and no-doc loand back on the market. Has anyone heard anything similiar or diffferent?

[TimtheGuy]

Originally Posted by REIRehabber

Is there any update on the liquidity of the mortgage industry? Have they loosen up lending criterias for self employed borrowers? I wish they hadn't takin away the stated and no doc loans from good standing citizens. Practically have to jump through hoops and hurdles these days. I did hear that later this year or next, we will see stated and no-doc loand back on the market. Has anyone heard anything similiar or diffferent?

I have not heard anything about bringing back the stated or no-docs.