Being paid by my own S-Corp - Do I qualify for a mortgage? (credit card, equity)

[brinked]

I have a unique situation.

I am 26 years old and I own a very popular website that really took off in october of 2008. I have earned over $150k (after taxes) last year and I am on pace to make over $700k this year (before taxes).

I want to have a mortgage on a 200-250k house but I am afraid I will not qualify because of the following reasons:

- I have a credit card charge off from 2005 on my credit report (for $3,200) , I would happily pay it off but even if I do, it will still be there.

- My credit score is only 647

- My 2007 income was very low (less than $24k)

I could outright buy a house but I would much rather have a mortgage. I made my business into an S-Corp and pay myself as an employee of the company.

Does anyone know if I will qualify for any kind of mortgage?

Thanks for the advice

[chet everett]

Self employed income always makes for a tougher mortgage, factor in your low credit score, rapid rise in income, short total earnings history, negatives on the credit report and the PALTRY sum you want to borrow relative to your ENORMOUS income and alarm bells are going to go off.

The simplest thing for you to do would be to put aside some of your $700K in income and buy a home free and clear for all cash. If you THEN decide that you would rather pay interest to a lender to get some of your cash out as equity it would be MUCH easier for a lender to write a mortage after they have seen your assets / income for at least another year.

[brinked]

thanks for your reply chet. Should I get my father to cosign? He has a 700+ credit score, same job for over 30 years.

[chet everett]

If you feel that you MUST have a mortgage then getting dad to cosign is an option, but honestly with the sort of windfall income stream that you have tapped into and the modest amount you want to spend on a house it is a no brainer to just pay cash.

[brinked]

agreed...but im looking to buy a winter home. I would like to buy a primary house within a year or two in my main area where a decent house starts at 750k (brooklyn, NY)

[PatRyanmortgage]

Lenders will require a 2 year history for self-employed borrowers (even showing them your 2009 ytd numbers won't help). I don't think you'll have an easy time getting a mortgage this year using your income alone.

Your best bet is with an FHA mortgage. You can have your Dad co-sign as a "non-occupant coborrower" and FHA generally goes down to 620 credit score.

The $3200 chargeoff will be there no matter what, but it's worse having it not paid off. Just pull off the bandaid quickly (pay it off now if you have the money)

[brinked]

Thanks for the info Pat.

I did some info and I read that FHA does go down to a 580 credit score. And FHA looks at the last 2 years of tax returns and averages the total amount. I do have tax returns for the last two years, even though 2 years ago my income was only 24k, average that with $150k last year and that averages out to over $85k a year for the last two years...plus a considerable amount so far this year.

The chargeoff is coming off in about 2 years...paying it off would just leave it on there for another 7.

[glenn_1000]

I'm self employed and invested a lot back into my business in 2007. My broker found a lender that only looked at last years return, which was much higher than averaging 2 years.

[brinked]

glenn,

2007 was before the mortgage and economy crisis. Does anyone know if some lenders STILL only look at 1 year earnings? Would be great for my situation. I would think there would be stricter guidelines right now, but hopefully I'm wrong.

[Norsky1]

I would suggest speaking with a local mortgage broker, go straight to the source.