1st time buyer questions. (home loan, income tax, credit, loan)

[spokaneglass]

Hello there, I have a few questions about getting a loan for a house.

I'm looking to buy a house ASAP (which may not be for a while because of my situation ), and trying to see what steps I need to take and how long I have until I can get a loan.

I'm 33 and have been self employed most of my adult life. I have never had a net income which would require me to file a income tax, so currently I have no verifiable income. The last 3 months or so I have finally started to make money with my glass art, and live poker, so now I'm not relying on handouts from family and scraping by because of expenses. I will be filing a tax return this year of about $72,000, should everything go as planned.

From what I have read on the net I won't be claiming many, (if any) deductions so that I can prove an income. I have also read that generally you need 2 years of tax returns to get lending, however I have heard there are cases where you only need one year?

I'm hoping that I can get some advice on how to best go about proving my income, and the quickest way to get a loan.

I have managed to have good credit over the years (about 720), I have a great rental history, and I will have about 25% or 30% down for the loan. (some savings and gift from mom)

The houses I want to get range from around 150k to 200k.

Ty in advance for any help.

[msdmoney]

You just started to make money in the last three months after years of handouts from family and scraping by and you want to immediately jump into a home loan? I would suggest slowing down a little. See if this income remains consistent.

[hindukid]

Income is tough. But do this. Create a second bank account seperate from any business income. Pay yourself periodically but do not do any business from the second account.

The lender will want to see stable funds not tied to the business. ALso if you are getting a gift get it long in advance and keep it in your account so its seasoned. Our lender would not consider a gift from my parents so in the end I had to pull money from and IRA. If its already in the account as far back as the statements you provide then they won't question where it came from.

Basically they are going to ask for three months of bank statements. What you want is to already have the money in those statements. Not to be coming up with it. Because then they question where everything comes from.

[smitity]

I think unless you get someone to co-sign, you won't be able to get a loan until you can prove you're 72000/yr income is stable for 2 years. Even with a co-signer, you might have trouble considering you've only had good income for 3 months. Lenders are very wary of the "self-employed" now. A good chunk of the housing crisis was due to loans being given to self-employed people with unstable income who were ultimately unable to continue paying their mortgage. As a result, anyone who isn't on a standard W-2 gets a hard time from lenders, even if your not really self-employed.

If the income you predict remains stable for 2 years, and you have the tax returns to prove it, you should be able to get a loan on your own assuming your credit stays strong. I'm not sure about the 1 year exception, but I was told by one lender that if you have stable income for a year, good credit, good savings, and your current job (i.e. the one you've been in for the past year) is in the same field/industry as your previous job, you may get away with 1 year of tax returns, but it depends on the underwriter and be prepared for alot of scrutiny. From what it sounds like, you fit most of that but I'm not sure your job/income pattern will fit, and that's the most important part for the lender.

For now, I think your best bet is to do everything in your power to ensure your glass art income will be stable long-term and keep putting money into your savings. You don't want to commit to a 30 year loan unless you know you'll have steady income anyway. Good luck!