Running into problems getting pre-approved for a loan as a self-employed person. Anyone have any advice on this matter?

Asked by kristen.landgrebe, Woodacre, CA Mon Jan 21, 2013

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11
, ,
Mon Jan 21, 2013
BEST ANSWER
Good afternoon Kristen,

When you say "Self-Employed" does that mean you are filing a Schedule C on your Federal 1040 tax returns? OR, are you a shareholder (sole or otherwise) of a Corporation?

We qualify you different ways depending on the manner of your filing.

If you are a shareholder of a Corporation we'll review your W2 forms for the past two years and your current income from paystubs/company checks. We'll want to see the Corporate returns to determine the financial stability of the corporation and other items such as short-term liabilities. We'll also want to know your percentage of ownership/shares.

If you file a Schedule C here's how we calculate your qualifying income:
-Average 2010 and 2011 NET income after expesnses. In some instances we might add back "depreciation" costs or other "one-time" costs which therefore increases your bottom line net income.
-3 Years in business: typically we like to see you are in business as a Self-Employed person for at least three years (although quidelines only require 2, 3 tends to be the conservative qualifying "norm" amongst Underwriters)

If you have not already done so, get yourself in front of a Local Mortgage Banker with those tax returns to get yourself thoroughly prequalified. I gave you general guidance, but every person's qualifications are unique, so your Mortgage Banker will help you arrive at the correct qualifying number.

Trevor Curran
NMLS #40140
Mobile: 516-582-9181
Office: 516-829-2900
Fax: 516-829-2944
PowerHouse Solutions, Inc.
185 Great Neck Rd, Suite 240
Great Neck NY 11021
Licensed Mortgage Banker – NYS Dept. of Financial Services
NMLS#3528
1 vote
, ,
Mon Jan 21, 2013
Kristen,

Thanks for providing more detail. So, what you need is two consecutive years income to qualify. I'd be wary of the other "offers" proposed. I'm an old-fashioned Loan Officer who believes the rules are the rules and the moment Loan Officers begin spouting at the mouth they "can do this" and "can do that" I get real nervous.

In the end, you can't fool Mother Nature...errr...I mean FanniMae/FreddieMac or the FHA. The rules are the rules. Get queasy when people begin suggesting otherwise; that's how the whole Sub-Prime mess came about.

I'm not licensed in your State, so I hope that helps you understand my advice is based on real experience and a desire to provide accurate information here on Trulia.com which is a consumer advocacy website.

Your best bet: qualify for a mortgage payment you can afford based on your spouse's income. Find a Local Mortgage Banker with at least 15 years experience and you'll be on your way to homeownership.

All the best to you!
Trevor Curran
NMLS #40140
1 vote
Robert Spino…, Mortgage Broker Or Lender, Mill Valley, CA
Tue Jan 22, 2013
Kristen,

I work with a lot of self-employed borrowers and would be happy to look at your scenario. I'm in Marin and a quick review would involve no cost or obligation, no credit check and maybe just ten minutes of your time. Get in touch if you think I can assist.

Rob Spinosa
RPM Mortgage
415-367-5959
rspinosa@rpm-mtg.com
0 votes
Linda Chu, , Millbrae, CA
Tue Jan 22, 2013
Hi Kristen,

The rules are usually 2 consecutive years but as any good loan officer should know most lenders have their own guidelines.

Length of Self-Employment: Borrower’s who have shorter history of self-employment – 12 to 24 months – may be considered, as long as the borrower’s most recent signed federal income tax returns reflect the receipt of such income as the same (or greater) level in a field that provides the types of services as the current business or in an occupation in which the borrower had similar responsibilities to those undertaken in connection with the current business.

We never offer or deal with subprime lenders, only wholesale lenders!


Linda Chu
Mortgage Center Corp
199 California Drive #200, Millbrae, CA 94030
Office: 650-652-9000 Fax: 650-652-9811
Direct: 415-531-3382
linda@mortgagecentercorp.com
DRE #01905237 NMLS #851470
0 votes
Linda Chu, , Millbrae, CA
Mon Jan 21, 2013
Hi Kristen,

If you can document YTD income information - one year 1040/1099 than we can get you pre-approved!

Linda Chu
Mortgage Center Corp
199 California Drive #200, Millbrae, CA 94030
Office: 650-652-9000 Fax: 650-652-9811
Direct: 415-531-3382
linda@mortgagecentercorp.com
DRE #01905237 NMLS #851470
0 votes
kristen.land…, Home Buyer, Woodacre, CA
Mon Jan 21, 2013
Thank you everyone for your help. A little bit more about our situation: I'm a freelance advertising creative and my husband has a salary. Both of us have credit scores above 800. The issue is with the fact I've been self-employed for a little over a year. I've been self-employed for a couple years total, but not consecutively.
0 votes
, ,
Mon Jan 21, 2013
Kristen, good question. Self employed borrowers are always more challenged to qualify because you have the freedom/flexibility to write off more expenses vs income on your tax returns.

Now is a great time to review your situation further as you look at 2012 taxes and income needed to qualify.

Please feel free to contact me to review your specific situation in more detail.

Sean Murphy
RPM Mortgage
415-710-6342
0 votes
Greg Corvi, Agent, San Ramon, CA
Mon Jan 21, 2013
Hi Kristen,

I have a couple different mortgage brokers, one is a direct lender and one is a broker who can check multiple sources for you. Feel free to email or call me and I would be happy to share their names with you. -Greg Corvi
0 votes
Johnny James, Agent, Beverly Hills, CA
Mon Jan 21, 2013
Self employed or not you still have to have your financial documents in order. Tax returns, bank statements, 1099's, investments. Look over the residential mortgage loan application.
0 votes
Laura Coffey, Agent, Santa Clarita, CA
Mon Jan 21, 2013
Being self employed myself I know how much I show on my taxes makes a huge a difference. Talk to lender about how much you need to make for what you want and when you do your taxes this here I would show a higher income even though you will pay more taxes you will qualify for more house.
0 votes
Mary Kay and…, Agent, San Rafael, CA
Mon Jan 21, 2013
Kristen,

Qualifying for a loan as a self employed person has become much more difficult over the last few years!! There is a lot more documentation required for anyone applying for a loan, but even more from someone who is self employed. Find a good lender or mortgage broker that you trust is giving you honest advice. If you would like a recommendation, we would be more than happy to give you some names.

Mary Kay and Kathy
0 votes
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