I'm self-employed, single mom, making $120k annually, credit ranging 690 to 735 among 3 bureaus, $200K cash for down payment, no credit card

Asked by Lookingtobuy, West Los Angeles, CA Sun Jan 3, 2010

debt, no car loan. I'm looking for a conventional 30 year loan. How much I might be approved for?

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Keith Sorem, Agent, Glendale, CA
Mon Jan 4, 2010
My personal recommendation is to stop asking questions like this in this format.

Talk confidentially with a loan officer about your questions. A competent professional can analyze your situation and put you in the position to obtain the best rate and terms for your purchase.

If you were my client I would point out these key points:
1. Interest rates are slated to rise in March when the Stimulus Funds the Treasury Dept. is using to buy mortgages are exhausted - some predict a one basis point jump in rates.
2. It sounds as though you will qualify for the $8,000 tax credit, or at least part of it. You need to be in escrow by April 30th and close by June 30th.
3. In most areas inventory levels are declining, so I would urge you to take action NOW by talking with a competent mortgage professional who can help you obtain the best loan possible.

Good luck.
If you need a referral to a top lender in your area let me know.
2 votes
Al Akerman, Mortgage Broker Or Lender, Lakewood, NJ
Mon Jan 4, 2010
Looking to buy,

Good for you-based on the information you provided, you seem financially stable, healthy and ready to move forward.

Your question in regards to how much you will be approved for has already been answered (although, I am surprised that you weren't swamped by responses from Realtors telling you that what you can get approved for and what you can afford are two different things-that seems to be the norm whenever someone asks what they would qualify for).

You asked what type of documentation you might be asked for.

The standard is to provide two years tax returns in order to prove your self-employment income. Your lender will average your income for the previous two years.

There are times where you might only be asked for one years' tax return. Your lender will run your information through a Fannie Mae underwriting system which provides minimum verification requirements for your loan.

Because of your credit score and available money for down payment, the system might only ask for one tax return, but many lenders will require two years regardless of the desktop underwriting results.

You will also be asked for 1-3 months (depending on the lender) of bank statements verifying your cash. Be aware that any large deposits will require an explanation. In your case you may have many large deposits from your business to your personal accounts and back, which is not a problem.

You might also be asked to provide a year to date profit and loss statement for your business from your accountant.

Of course, once you run your scenario by your lender he will let you know exactly what to provide.

I can attest to Ted's professionalism and the accuracy of his answers here on Trulia because I have been on the same thread as him on many occasions.

Hope this was helpful.

Good luck.
1 vote
Ted Canto, Mortgage Broker Or Lender, Scottsdale, AZ
Mon Jan 4, 2010
Hi Looking,

Respectfully, I am not sure what AC was even trying to say and some of what I can make of it is entirely misguided. I am known in this community to not sugar coat (and sometimes get into some debate) and this is because I do not believe anyone who is considering investing their time, money and efforts should be fluffed with a bunch of how pretty everything in real estate should be.

Your profile looks great and of course you are about to get bombarded with answes throughout the week. This is what it comes down to = AGI (Adjusted Gross Income). This is the final number on the 1st page of your tax returns. After all the write offs and company and personal expenses, what is the final adjusted gross income? Then the next question is this, "Have you been self-emplyed for the last 2 years? If not, then you may encounter some problems or maybe not, depending on what the Automated Underwriting System states.

Broker or Lender, it does not matter....Hmm well actually it does now.. Brokers are not as accessible to money as they once were. A direct lender has much more leniency than brokers do "IN THIS MARKET". The time where brokers could shop for better rates and terms are over. They can't compete with a lender. I am sure I will get some remarks about this but the truth is, THEY CAN'T. People who say brokers are better just feel more comfortable with the idea, doesn't mean that it's true. However, when I say "lender", I do not mean Wells Fargo, B of A, Chase, I mean the correspondent lenders. They offer more opportunity than brokers or the big banks and are much faster in approving the loan and provide much better service.

I can go on with several necessary questions and comments but the truth is that you need to decide what lender you want to deal with and have him look over your situation. Reading through 20 remarks to this post will lead you to the very thing I am recommending here, the inevitable = Speaking to a Loan Officer and having them analyze your AGI/ Tax Returns. Any other answer is fluff and wasting time.

I would be honored to go over your personal scenario with you and provide you with my analysis, if you'd like.

Good luck and Happy New Year!
Ted Canto
Mortgage Consultant
Direct: 480.650.8602
1 vote
Shel-lee Dav…, Agent, Rolling Hills Estates, CA
Mon Jan 4, 2010
I am not a lender, however, having worked with many buyers to line them up with the right lender for the circumstances, I have learned a bit about what lenders look for. The caution I will add is, many lenders are tightening their lending practices in 2010, so find someone to work with and then find out how long the loan product they are quoting to you will be available.

That being said, here are some of the items you might want to gather before meeting with a lender:
1. Tax records are the most important. Make sure you have at least two years of tax returns with you.
2. Since we just finished 2009, you will not have these tax returns available. Bring your financial statements for the most recent month's closing. This might well be November 2009 at this point.
3. If you work on a contract basis, bring copies of your current contracts and a schedule showing percentage completion on these contracts.
4. If you have accounts receivable, bring your aging. (Do the same for your payables.)
5. Make sure to gather 6 months of bank statements if your other documentation is weak. This will help support that the cash flow you claim to have, really does exist.

Then, if you need help finding a couple of great lenders to work with, feel free to contact me. Dare to Dream.

Shel-lee Davis, CDPE
Your Real Estate Consultant for Life
RE/MAX Palos Verdes Realty
1 vote
Joanna Jensen, Other Pro, Livermore, CA
Wed Jan 6, 2010
Hi Looking to Buy
I think now is a fantastic time to buy.
I am a realtor and my husband is a loan officer. I know some people are thinking of waiting untill the bottom drops out, but, how will we know when that happens?? Of course, it is when prices go back up and we say, we should have bought.
right now what we are seeing is when nice homes are coming on the market there are multiple offers. However, the prices are right. this is a great time to buy, and definately buy what you can afford. What I would say if dont spend more than 35% of your gross income on housing. You definately want to budget for a rainy day and being a singly mom you will be buying shoes and paying for school luches and clothes and shopping. You have a significant down but I would save at least 5 months worth to keep as savings. That is just my advice.

I would think you could buy a home for about $600k approx. Remember there are alot of short sales out there. So if you buy a home today for $600 - $650 your buying what someone paid 2 -3 years agot $800 - 900k. That is not bad.

I would definately play it safe depending on your line of work. If your commission and your income varies I would spend a little less. A lot of us were making significantly more two years ago and are now making 2/3 of that range. So I would play it safe.

Interest rates are fantastic. There are lots of foreclosures and short sales you can find. You may even be able to do a lease option. In your position I would get prequalified now and just start looking to find the areas you like. First time tax credit are supposed to continue and may even raise to $10k . Remember, the asking price may be $600 buy you could always offer $525k.

Best of luck,
Have fun Shopping
JoAnna Jensen
Legal Assistant
Chris Jensen
Loan Officer
Web Reference:  http://www.joannajensen.info
0 votes
Robert Chome…, , San Diego, CA
Wed Jan 6, 2010

I have to really,really disagree with you! Almost every lender interprets the FHA, VA and conventional guidelines radically different. There are many,many different overlays imposed by each lender ON TOP of the base guidelines for all these loan products. For example on a a FHA jumbo loan I just closed for a self-employed business owner, the loan was turned down by many large banks that would not add back to her income some of her deductions. I finally found a lender that was willing to add back the deductions based on their interpretation of FHA guidelines and risk tolerance. If my only choice was my in-house banking products I would have been dead in the water with this file.

Also, as a mid sized mortgage banker they have to make your loans "sellable" to your investors. These mid sized mortgage bankers are very risk adverse to not being able to sell a loan or having to buy it back, therefore they can be very, very strict on guidelines and decline loans at the 11th hour. The larger banks such as BofA, Wells, US Bank, etc... have deeper pockets and are not as paranoid about buy backs. As a broker you have the choice to send a loan to dozens of mid sized wholesalers and also all of the aforementioned large banks.

Some of the most experienced loan officers out there (people with 20 yrs + experience) are often at brokers out of choice. You ask them why and they will tell you they don't want to be limited to a banks "in-house" loan products.

I'm really not sure what you are trying to say has changed with brokering?

There are also wholesale lenders that can close loans in 2 weeks as well.
0 votes
Edward Uriar…, , Pasadena, CA
Tue Jan 5, 2010
Hello Looking To Buy - The first questions I have is what is your comfort level for payment once you include property tax and insurance or otherwise know as PITI (Principal, Interest, Tax and Insurance), because what one might qualify for will be different from comfort, you do not want to over extend yourself were you have a dramatic change of Life style.
0 votes
Merlin Barri…, Agent, Valencia, CA
Tue Jan 5, 2010
Dear Looking to buy,

Happy New Year! You do meet all the requirements to buy a home. to find out exactly how much you will be approved for you can find out once you get prequalified by a Mortgage Broker, or Bank ..........my husband and I are a team, can can prequalify you and we can assist you and help you get a good fixed rate, for 30 years and review together with you, to see if that program is convenient for you!

I am a Realtor who can assist with the purchase of your New Home.

Which area do you want to live ? Pasadena? or West L.A?

Again if you are not represented by any Realtor. Call me I am here ready and available to assist you!

Good Luck!

Merlin Barrientos
Realtor Associate
Keller Williams Realty VIP
direct 661 713-8780
or merlin1@kw.com
0 votes
Ted Canto, Mortgage Broker Or Lender, Scottsdale, AZ
Tue Jan 5, 2010
Dan Chase "I search for and speak the truth as I know it."

You are not searching in the right places.
0 votes
Dan Chase, Home Buyer, Texas City, TX
Tue Jan 5, 2010
Just to muddy up the waters a bit. Are you aware of the foreclosure problems? Do you know how prices are likely to drop? Look below. It may give you a slightly different perspective on the real estate market.
The last 2 links are especially scary.

Look at the links below. They ALL say to wait. At the bottom is a nationwide housing price predictor. It is based on actual research into certain city areas in different states.

3 reasons home prices are heading lower
http://money.cnn.com/2009/12/31/real_estate/home_price_drop/… Inventory Still Dramatically Oversupplied — Before You Add In The Foreclosures
http://newobservations.net/2009/12/27/housing-inventory-stil… Mortgages Get Worse For Each 1 that Improves
http://www.trulia.com/blog/lukemullins/2009/12/3_mortgages_g… Projected to Cause Mortgage Crisis in 2010
Q3 2009 U.S. Foreclosure Heat Map
A nationwide forecast for real estate is below. Look on the left side, click on your state
0 votes
Ted Canto, Mortgage Broker Or Lender, Scottsdale, AZ
Tue Jan 5, 2010
Robert, there are no "Niche" loans anymore. FHA, VA, USDA, Conventional, Jumbo .. Am I missing something here?

That broker line of "I can shop the loan in several different places" doesn't hold much weight anymore. It did, once upon a time. I can broker loans too from my company but would I? No way! I can do anything that any broker can do and in 10-15 days closing. You may want to ask if your company is right for you.. Respectfully.
0 votes
Robert Chome…, , San Diego, CA
Mon Jan 4, 2010
The key as stated below is with self-employed is to have a experienced loan officer review your last 2 years tax returns so they can determine the amount of income you can use to qualify. Lenders go off a self-employed persons NET not GROSS, but there are many deductions (such as business use of home, depreciation, etc.. that can be added back to your qualifying income).

I have to say I respectfully disagree with what Ted says about lender vs. broker. I have worked for both direct lenders and brokers recently (and throughout my career both large and small). And I currently can do both broker and do direct funding. Nothing has changed with what brokers can do. Brokers still have the advantage of accessing dozens of different funders and often can place niche types of loans that a direct lender will not approve because they only have limited options for in house funding. I have seen it as recently as last week where I had to broker a loan that could not be done in-house. I also think brokers can many times find the most competitive rates because they can sift through all the wholesale rates available from dozens and dozens of lenders in a given day and find the lender with the best rates on any given day.

Lastly with the new Good Faith Estimate, brokers are held to tougher disclosure requirements where they have to disclosure the Yield Spread Premium (YSP) they are paid by the lender. Direct lenders are paid a Service Release Premium (SRP) that they do not have to disclose to the borrower.

But direct lenders can be great sometimes when you may need more latitude in underwriting for an exception and other areas. So I think both have their place. But I do not agree whatsoever with the comments below regarding brokers.
0 votes
Lookingtobuy, Home Buyer, West Los Angeles, CA
Mon Jan 4, 2010
Thank you all, your info is very helpful. I now have an idea of what I need to prepare before talking to a professional lender/broker. I was concerned that being single and self-employed will be a disadvantage to the loan approval and limit, as you all know that most self-employed businesses would write off expenses to the penny. So thanks Ted for telling me about the AGI.
0 votes
Rudy McDowell, Mortgage Broker Or Lender, Bloomfield Hills, MI
Mon Jan 4, 2010

Most of the answers you've recieved are spot on. In the final analysis, you need to discuss your situation directly with a qualified/reputable lender and loan officer. Having worked once for a mortgage brokerage and bank, a direct lender is the better choice. A direct lender that solely does and specializes only in home loans is the best choice. Shore Mortgage is such a lender. We use our own funds to close, all loan officers are licensed and registered in the states they do business in, and our processing, underwriting, and closing departments are all directly in-house. All of whcih are assets that will save you significant time and money.
I'm available to assist you further if you wish.

Rudy R. McDowell / Senior Loan Officer
NMLS#: 141856
770 S Adams Birmingham, MI. 48009
o: 800-678-6663 Ext 5154 / f:248-594-6156 /d: 313-410-1344
email: rmcdowell@shoremortgage.com
corp: http://www.shoremortgage.com
"Referrals are the Best Indicators of My Service and Your Satisfaction
0 votes
Ac Cooley, , Port Angeles, WA
Mon Jan 4, 2010
Wow that brings back memories. Having two rug rats to worry about myself, I bought home reasonably priced so as not to over extend myself or should I say keep my sanity. What I am saying is being a single parent is a factor when buying because you really need to stay below your means so that you keep harmony within yourself. I don't know the age of your child/children but if they are preteen then buying within your means, means buying within your sanity. So for that reason alone buy a home not a trophy. With that said to have a credit score of 690 to 735 that is a very good score but most take the mid score of three or the lower of two. . However they will be looking for 3 active open lines of credit , two must be over the 4000 to 5000 credit limit (depending on bank or brokers lenders), if your looking at putting less than 30 % down. If you put up 30% the banks generally become very forgiving , they will ask for two years tax returns hopefully you don't do what most self employed do write everything off, which is great for not paying taxes but a problem when your wanting a loan. The next issue that will come into play will be the interest rate "don't let them sell you on a two year adjustable by telling you have to because you never had a home loan before. Forget the conventional banks because most will pull your credit then turn you down with a smile. So educate by using the information you have at hand to visit four brokers. They will all tell you they need to pull credit don't let them, even though what they pull will be somewhat different your score will be with in a reasonable spread to give you an estimated answer. Keep in mind they are bound by regulations that do not allow them to use any credit pulled by another company,so at the end of the day they will have to pull it under their own name to use it for an exact figure from the brokered lenders. This is a must and don't be afraid to ask each broker about his fees in writing and the fees from the 3 companies they plan to run it through. Because you pay for them all. Appraisal fee broker fee lender fee, title and escrow fees, and if they are putting any points on the top. If the broker claims to be a banker and can write his own loan "he is right" but what a banker doesn't tell you is the amount he can charge without telling or showing...so go to a broker...they have to show you yield spread which is a fee attached to the back of the loan which you ordinarily don't get to see if you deal with a bank or a broker that claims to be a banker. Let me back up a little. Bank , Broker banker, broker. Banks have a lot of control but no balls to lend. Broker banker, has the balls to lend but doesn't have to show you what he really makes and they make a lot. Broker doesn't have any authority to lend without a lender but has to show everything he makes keeping him the most honest that"s the bankers and broker bankers way of getting back at the working class that actually made it up into the financial institutions without an MBA. Which is why the banks blamed the brokers for writing all the bad loans when it was the banks wrote the programs and gave them to the brokers saying they are better for the public. Then the government came down on the banks and the banks said "The brokers made us do it" . Now the banks stand to make billions of bailout money so were do you think your politicians put the focus...yes your right on brokers. , Our government blamed the brokers.....because it was easier to jail them and take your focus off the government and gain sympathy for the failed banking institutions who allowed the programs in the first place. The government turned their head for The banks who sold the loan programs to you know who The BROKER. you see where this is going....chances are there are a lot of rich politicians out there that we will hear about 20 years from now. Bottom line use a broker not a guy who claims to be a banker. Don't ask me about all the poor brokers that were arrested because of the banks .....I might write an even longer story about why are the politicians and lobbyist should be in jail with them and they have MBA and PHD"s and only lobbyist know what else....? After all they are the ones with the real money....as a tax payer you should know ,because tax payers gave it to them and allow the lobbyist to keep going..?
0 votes
Lookingtobuy, Home Buyer, West Los Angeles, CA
Mon Jan 4, 2010
What type of documents I need to show besides tax records?
0 votes
Michael Barr…, Agent, Irvine, CA
Mon Jan 4, 2010
Hi there , You look to be in great shape to get a great loan. $ 800 plus but you really need to sit down with a lender to get all the details and figure out which type of loan works best for you. Every lender is differernt and they charge different too. You should shop around to get the best deal

If you need guidance on what questions to ask let me know

Kind Regards
Michael Barron
First Team Real Estate
0 votes
Bentley Advi…, , San Mateo, CA
Sun Jan 3, 2010
Assuming you truly have $120k of documented income, have zero debt and a min qualifying credit score of 700, you might qualify for an $800k+ purch price. With your $200k down, the loan amount would be roughly $600k.
0 votes
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