Financing in Kansas City>Question Details

Ginkc, Home Buyer in Kansas City, MO

Seeking Self Employment Financing Options

Asked by Ginkc, Kansas City, MO Wed Mar 23, 2011

Hello,

My wife and I are relocating to Iowa in a few months and looking to purchase a home. I'm self employed and have been in business for the past 3.5 years and in the same industry for 5 years. In 2009, one of my clients brought me on full-time after 6 months of consulting work. I was paid as an employee and I've since went back to consulting work. I've been told by one lender that this decision drastically hurt my chances of being financed as my income for my actual business was only a fraction of that in 2010. I can provide all tax information for the past 2-3 years and can verify employment status. My credit score is 750 and have never missed a payment in my life. I have very little debt and even own a condo that is currently rented out. My wife is seeking employment but until she receives a job, I want to see what my options are in case she can't locate a job. Can anyone help? What are my options for getting financed?

Thanks!

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BEST ANSWER
Ginkc-

This is an issue but can be overcome. How long have you been back to consulting? What portion of your income was paid w2 last year?

You may be required to provide an audited Profit and loss statement for what you have done for the period of time you have gone back to being paid 1099. If the rest of the file looks good, you might be able to work this out provided that you are tracking enough income in your business on your P and L AND it is reasonable to an underwriter that your business is portable.

I hope this helps. Good luck and let me know if you have any questions.
0 votes Thank Flag Link Thu Mar 24, 2011
Ginkc-

If you have time, give me a call tomorrow. I don't think we finance in Iowa but I can find someone who does and I will be happy to help put this together for you. If you don't have time to call, emaill me your tax returns for 2010 if you have done them as well as a credit report if you have already had it run.

Based on the info you have put in this thread, it shouldn't be too hard to make this work.
0 votes Thank Flag Link Sun Apr 3, 2011
Ben Fox -

Just spoke with a lender in the Des Moines area and they said they wouldn't consider ANY of my income because it's been inconsistent and I haven't been fully self employed for 2 years because of the mix of W-2 & 1099. The way I interpreted it was they wouldn't even count my income even if my wife had a job lined up after we move. Any other ideas? I'm currently 0/3 with lenders and losing hope fast.
0 votes Thank Flag Link Fri Apr 1, 2011
Ginkc-

If you are putting down 5-10%, why go FHA? You have to do an upfront financed premium of 1% along with paying a monthly premium.

Why not do 95% conventional with a one time premium so there is no monthly mortgage insurance? Beats the heck out of an FHA and with your scores and income, you would more than likely qualify depending on debt.

I hope this helps.
0 votes Thank Flag Link Thu Mar 24, 2011
Ben Fox -

That's correct the 50k in 2010 was 1099 self employment income. My 2010 taxes are being filed any day so I'll have all of that settled very soon. I've mostly been looking at FHA loans and will likely put as much as 5-10% down. I'm hesitant to put 10% down in case of a rainy day but will do so if that's the difference between being pre-approved or not. Most of the homes in the area we are moving to are in the 200k - 250k range so that's the magic number at this point.
0 votes Thank Flag Link Thu Mar 24, 2011
Ginkc-

If I am understanding you correctly, the 50k in 2010 was 1099 self employment income. If that is the case, you should be in pretty good shape. DU (fannie mae's automated underwriting system) is likely only going to ask for your most recent year's returns (2010). You will not have to average the income (again, disclaimer that an underwriter can ask for two years if they choose to overdocument) and you can base it purely on 2010. If income is higher this year, you can take your audited p and l and average it with 2010 income. If you haven't filed 2010, go ahead and file it. You can always amend later if you discover you overpaid.

Flexibility is going to be determined by file strength. I don't think your deal, if i am understanding it properly, is going to require that much flexibility. If 2010 was all w2, you will need those p and l's year to date audited more than likely. How much are you putting down on this?
0 votes Thank Flag Link Thu Mar 24, 2011
Thanks for the answers everyone!

@ Ben Fox - I've been back consulting for a little over a year but had my best year ever in 2010. After Q1, I'm on pace to have an even better year in 2011. Obviously things can change a lot in 9 months but work has been very steady for me and I've brought on some larger clients. My gross in 2009 was 72k but 44k of that was W2. 2010 gross was 50k. I have all tax documents including P&L statements available but they haven't been audited. As far as being portable, I'm a freelance web and graphic designer with my clients being in every area of the country so that shouldn't be an issue. I don't think any of this will be a problem if my wife can lock down a job in Iowa but wanted to explore my options just in case she can't locate a job in time.

@ Sherri Oaks - thanks Sherri!

@ Saurabh Sethi - Thanks for the encouraging words. That has been my philosophy all along, I'm going to be bringing a lender business if they will work with me and understand the situation but I've yet to find a patient lender.

@ Jon Adams - thanks Jon, I may be in touch!
0 votes Thank Flag Link Thu Mar 24, 2011
I recommend Robert Hastings, He is very
knowledgeable and shoukd be able to tell you something quickly. Contact him at 816/655-6584 or apply online at http://www.homloansbyrobert.com
0 votes Thank Flag Link Thu Mar 24, 2011
As long as you show stable income it should not be a problem. Lending requirements have become a little more relaxed. FHA only requires proof of one years worth of income and a credit score of 640 to get a 3.5% down loan for 30 years fixed at 4.375 %.
You really shouldn't have a problem, if your current lender can't do it, find someone else. Lenders make money only when lending, and you have to remember, you are the boss, not the lender.

Hope this helps,
Saurabh
Web Reference: http://www.sethihomes.com
0 votes Thank Flag Link Thu Mar 24, 2011
Credit score goes a long way, but so does LTV. I could give you recommendations locally, but I don't know how much I could help in Iowa.

I have three people I recommend for the KC market & I know they're with banks, so they should be able to help, but no guarantees. You can contact me directly at [info at toddappraisal dot com]. I don't want to give their info out in an open forum like this for fear of attracting spammers.
0 votes Thank Flag Link Thu Mar 24, 2011
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