I recently tried to refinance however was denied because of my dti ratio. I'm self employed and take a salary and profit as income, why was I

Asked by Michael, Anaheim, CA Tue Aug 31, 2010

denied? The lender said it was because I have less than two years of taking a salary, so they won't allow that as income. My biz is profitable and has been for years, but last year I decided to also take a salary to reduce self employment tax. The salary is paid from my profits which are deducted off of my company profit. However it's my money that I earned either way, the lender is saying I am making 50% less since half is left as profit and the other half is salary yet they won't count the salary. Is this some bs excuse to deny me because nobody wants to lend to the self employed?

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Wed Sep 1, 2010
Michael, don't give up. Every lender's underwriting process is different, and more than that every underwriter is different. You can have one that thinks everything is cool, and then other that has a problem with everything. In addition to that, every lender calculates income differently.
Go to a mortgage broker, and have them try you with a few different lenders.
I'd help you, but we don't lend in CA.

Elena Ollick
Amerivest Realty
Faith Home Loans
skype: napleshomes http://www.andrewollick.com/realestateblog
0 votes
Aaron Zapata, Agent, Placentia, CA
Tue Aug 31, 2010
If you need a referral for a different lender, send me an email and I'll forward you a few names.
I am self-employed and feel your pain!
-Aaron Zapata
Prudential CA Realty
1 vote
David Pham, Agent, Garden Grove, CA
Wed Jan 12, 2011

I agreed with others that underwriting guidelines may vary from lender to lender. If you have been in business for more than two years and your business has been consistently making enough profits, your file should look reasonable to many lenders. If a lender denied your file because you had diverted some $$$ as W2, we would fight back if we were handling your file.

Of course, that lender might have denied your file for other reasons. Without looking at your actual numbers and tax returns, it is very to say. However, since lenders' guidelines are different, an experienced mortgage broker should be able to review your file and submit it to the most suitable lender.

David Pham
National Brokers - connecting people to homes
0 votes
Victoria Alw…, Agent, Yorba Linda, CA
Wed Jan 12, 2011
Hello Michael:
Would love to hear of the outcome of your loan?
If you have not resolve it, we are here to help.
Please drops us line here at Trulia.
Victoria Always, REALTOR
0 votes
Emily Knell, Agent, Huntington Beach, CA
Wed Sep 1, 2010
Another way to reduce self employment & business income tax: You can take advantage of a newer tax law revision, the program is called Private Employer Benefit plan & you can practically reduce / eliminate your paying business income tax legally (both State & Federal). So long as you have 5 or more employees that you are currently paying via W-2.

This isn't a scam & you don't move forward with the program unless your own attorney / other financial advisers say it's good & to 'go for it'.

Regarding your troubles getting refinanced, I can offer the help of one of my loan brokers, see what he can do to stretch your salary / income explanation as far as possible, he's pretty creative.

Email me directly, I won't re-post on this same Trulia thread. I can give you a PDF doc explaining the benefit for your business & the info for my lender. Always good to get a 2nd opinion with lenders & shop around in your case.

562-430-3053 cell
0 votes
Cyndi Mino, Agent, Huntington Beach, CA
Wed Sep 1, 2010
Hi, Michael.

Have you gone to your current lender and tried? Ask them if they can Streamline your loan? The requirements are not as stiff as trying to refinance thru another lender.

Being self employed has it's pros and cons and you've now seen one of the cons. They can't count profit since it is like commission, no one really know what it will be from year to year. Standards have gotten very tight in the last few years and it really does hurt the good people.
0 votes
Scott Godzyk, Agent, Manchester, NH
Wed Sep 1, 2010
You need to meet with a local and trusted mortgage broker, they can prequailify you at no cost, they will look at your credit plus your financials and let you know if there are any programs that you may quailify for as self employeed and given your salary.
0 votes
Barbara Van…, , Folsom, CA
Tue Aug 31, 2010
Hi Michael -

Since your loan is conventional and within Fannie Mae loan limits, we need to determine if Fannie or Freddie owns the mortgage. If they do, Fannie and Freddie each have a program that allows homeowners to qualify for a refinance based on your original loan application.

Don't give up hope. Call me Wednesday and I'll outline the process with you.

All The Best,
0 votes
Michael, , Anaheim, CA
Tue Aug 31, 2010
Conventional. Property appraised at $655k and I owe $487k. I have a 5.75% 30 year fixed w payment at $2800 a month. Want to refi to lower payment by 150-200 without paying much in cost. I have 805 credit, wife is 815. No debt exept for a car lease and a rental that is break even.
0 votes
Jerry Reed, Agent, Yorba Linda, CA
Tue Aug 31, 2010
Hi Michael, I am a Realtor and I don't do loans. I have heard many times about being self employed and having less than 2 years of working under these circumstances. It might just be true. If you would like to talk to other lenders that I know are good I would love to provide their information.
0 votes
Carl Henker, , 95928
Tue Aug 31, 2010
With out reviewing your taxes it sounds like you need to seek a lender that has experience dealing with self employed. If your business has been operating for more than two years your salary should count. You need to seek a second opinion. Many lenders are making loans to the self employed.
0 votes
Barbara Van…, , Folsom, CA
Tue Aug 31, 2010
What kind of loan do you have now?

0 votes
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