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I've been lurking around these boards for a while, and now I am hoping that someone out there can help.
My husband and I make a combined income of about $120K/year. The trouble is, that we are both freelancers/self employed, and cannot show that much income. In order to make our taxes manageable to the point where we are not broke, we file with a lot of deductions, thus showing a lot less income than we actually make.
I know that stated loans are all but dead at this point. We do not have a lot of money to put down - we live in an expensive market, and the most that we can put down for a down payment is between $10K and $15K. We were sort of hoping to go the FHA route... but that is likely impossible as well.
My scores are in the 680's, and the husband's scores are in the mid-660's. Are our dreams of home ownership forever dashed because of the sins of the many?
Your hopes are not forever dashed. But it will be a long long time before this depression fades from memory and lenders become a little more human again.
I been self employed for more then 30 years, mostly sole proprietor and have had trouble obtaining a mortgage with each home I bought over the years. I am well aware of your fears and concerns, I been through it quite a few times myself. The new rumor today is the mortgage company wants a letter of compatability from the borrower/couples Minister to show risk of divorce/seperation is minimal.
In a world where discrimination is such a dirty word, to discriminate against the self employed is as normal and accepted as having a cup of coffee.
It sucks. But it's still better then working for some slob at the expense of your own time and pride.
I feel better now. The mortgage companies are getting what they deserve.
You might want to check into what is called a "no doc" or "lo doc" loan...check with a good mortgage broker to help you out...these types of loans might require a higher mortgage insurance premium. You may also want to talk to a realtor to check into homes on the market in your area that the owner may be willing to carry, or a lease option.
no doc loans require a really high percentage down, right...? We really don't want to put that much down - we would rather use funds to move and buy furniture so we are not completely broke...
You might want to check into what is called a "no doc" or "lo doc" loan...check with a good mortgage broker to help you out...these types of loans might require a higher mortgage insurance premium. You may also want to talk to a realtor to check into homes on the market in your area that the owner may be willing to carry, or a lease option.
No doc or low doc loans do not exist as this time. Every loan requires that you prove your income with W2's and paystubs or tax returns. If you write off a bunch, to minimize taxes, then you will not qualify to purchase a home now.
A lease or find a home that the seller is willing to carry the note, is about your only option.
Being self employed comes with a benefit of being to write off a lot of expenses so you can pay minimal taxes, so as a underwriter just said to me you cant have your cake and eat it to.
You could also for the next 2 years take very minimal deductions, show a higher income then qualify.
and cannot show that much income. In order to make our taxes manageable
Ok. Well I am kinda caught between crying you a river cuz you aren't able to get a home loan. And NOT crying you a river as you evade the taxes that the rest of us employed people are all paying.
My husband and I make a combined income of about $120K/year. The trouble is, that we are both freelancers/self employed, and cannot show that much income. In order to make our taxes manageable to the point where we are not broke, we file with a lot of deductions, thus showing a lot less income than we actually make.
You can't have it both ways. Qualify for what you report or buy for cash or put down a large down payment.
Your tax statements are going to give you a lot of a headache with getting a loan... I talked to a mortgage friend of mine and here is what he said:
lo doc loans
-Minimum of 20% down (with only 20% down today rate is 8.5% with a ridiculous 8 discount points) very expensive
-you also need to prove that you have been self employed for at least 2 years (with a license)
-Lastly credit score is needs to be above 720, ouch
All in all Stated is a horrible, expensive, seldom used product.
Tell me more about them being self employed...if they are less than 25% owner, we don't have to consider them self employed. Or if the business has been around for more than 2 years and even slightly profitable then we have a good shot at FHA/Conv. But that's going to be the key...what do the taxes say.
You might want to look at the options of the seller carrying right now or a lease option, that way you can lock in a lower home price since home prices are low at this time...or you can bite the bullet and wait it out and save more and build up some more paperwork to try to obtain a loan. You are right, mortgages are harder to come by right now as the pendulum has swung in the extreme opposite as a reaction to lax mortgage practices in the past. Get a good mortgage broker to work with and be patient.
In order to make our taxes manageable to the point where we are not broke, we file with a lot of deductions, thus showing a lot less income than we actually make.
Well then I don't have a lot of sympathy for you. If you are actually making more money than the tax records show, then you are stealing from honest taxpayers like myself. You can't have it both ways. I have years of experience doing Schedule C and attachments by hand for my husband till I had him hand that off.
I think when we bought a house using my husbands self-employed income we had to provide 3 years of tax records and that was good enough for them [but that was awhile ago - the current home is strictly on my income and our records are completely separate, tax records, finances etc.] So things could have changed over time.
There's absolutely nothing wrong with minimizing your tax liability as much as possible - as long as everything is legit. If not, you could be in serious trouble with the IRS in the future. But...assuming your deductions are all perfectly legit, you should be aware that a lender will not rely on your adjusted gross income from your 1040....they'll do a cash flow analysis to determine your REAL income (probably using the last 3 years tax returns, and maybe a current financial statement) and base your debt/income ratio on that. Non-cash expenses (such as depreciation) are factored back into your income. The cash flow analysis can be complicated...especially if partnerships or corporations are involved.
Lenders don't discriminate against self-employed borrowers. They simply want to ensure that the income stream on which repayment of the loan is based is accurate. For "normally" employed people, that's pretty easy since your employer can verify your pay rate, YTD income, etc. If you're self employed you ARE a business and you have to expect lenders to ask for essentially the same information they would of any business applying for a loan - that's not discrimination.
The people who are going to have problems are those who don't claim all their income (usually because a good part of their income is in cash), but claim all their deductions. Sorry, but if you claim you make $90K and only report to the IRS that your gross business income was $40K, I'm not basing a loan on the $90K you claim. I'm basing it on what I can actually verify!
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