Home Buying in Atlanta>Question Details

TheShuken, Home Buyer in Baltimore, MD

Self Employed mortgage qualification problems

Asked by TheShuken, Baltimore, MD Fri Apr 26, 2013

I was prequalified for a 241k townhome and had an offer accepted for the new build which closes on May 31st. However I have run into problems in the underwriting process. My business provided me with 52k for 2013 (45k in the bank right now), 35k for 2012, and 5k in 2011. My credit score is 709 and I have around $200 a month in studentloans as my only debt . Fannie and freddie based underwriting won't accept my 2013 income, and my 2012 income isn't enough to qualify. My fiance, also employed by this business made the same as me, but with a higher monthly debt of $800 a month isn't enough help to qualify. We can do as much as 20% down, but that first seem to help enough What are our options here?

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William Polack’s answer
Well, not sure if I can close by then, but I can use your bank statements from the previous 3 to 6 months and average out the deposits to qualify your income. Before you start celebrating though, read on:

It sounds like you're on the right path to doing well in your business in only 3 years. It's too bad that government yahoo's won't allow sub prime financing back. Back then, we could use your YTD income and average out deposits. The issue, however, was the high interest rate. So, your issue will be that you'd better keep your income going just as good for this year in order to finance out of my loan next year.

I don't do sub prime loans. Worse. I do private money loans. These loans are not for the people who complain about rates and fees. They are loans offered to people for a temporary basis. The interest rate starts at 9.5%. Credit is irrelevant. Good, bad or ugly, your rate starts at 9.5%, interest only. There is no pre pay penalty, however, in order to refinance using the value of the property, you may have to wait one year unless one of these fine financial institutions below can do it in less time.

Fees up front range from $750 to $1500, depending on what you're buying, where you're buying, how you're buying and why you're buying a property. Fees due at closing also apply regarding the same. Down payment ranges from zero to 35% for residential properties and zero to 50% down for commercial.

Hard money financing is not allowed for primary residence. I don't offer hard money. I offer private money and it has little to no restrictions on what can and cannot be charged for primary residence. You're basically getting owner financing on a property. You'll still go to a closing and sign loan documents but you're payments most likely won't be reported to the credit bureau so you'll need to keep track of it yourself using cancelled checks.

It can take 30 to 60 days to close a loan. Why? Because they can. I don't mean to sound rude, it's just that people confuse private money with hard money. It's like comparing FHA to conventional lending. Same idea, different rules.

If you'd like more information, visit my website and good luck.
0 votes Thank Flag Link Mon Apr 29, 2013
I would recommend The Lenders Network. They are kind of like Lending Tree for people with various difficult situations like poor credit, self employment etc. They have a few lenders they work with, they will be able to point you in the right direction.

Good Luck!
0 votes Thank Flag Link Thu Aug 1, 2013
0 votes Thank Flag Link Sat Apr 27, 2013
As Rodney and others mentioned it seems your LO didn't know SE income is calculated differently than a W2 wage earner. Your options are to have enough of a down payment to bring your DTI down to what the bank is actually approving you for. Or find a cheaper home within your DTI budget.

It is horrible when this happens, I am sorry you are going through this.

Best of Luck;

Christina Solorzano;
CEO & SR Credit Repair Specialist at
Everlasting Credit Repair
Ex-Mortgage Banker of more than 10 years.
0 votes Thank Flag Link Sat Apr 27, 2013
It's April & you've made $52K? What do you do? Are you saying you made $5K in 2011, $35K in 2012 & you'll net $156K this year?
0 votes Thank Flag Link Fri Apr 26, 2013
I am paid once annually from a once a year event that we organize.
Flag Fri Apr 26, 2013
If you are self employed, you cannot ever use the current year's earning to qualify. Only income pulled from the last 2 years of Federal Income Tax returns can be used as actual Qualifying Income.

In this case, you would use 2011 and 2012 averaged over 24 months. The $35K + $5K gives you $40K for 2 years. This averages to $1,666.67/month in qualifying income. Please keep in mind that these are jsut rough numbers since we use several differnt lines on your tax returns to actually calcualte your income.

It sounds like the loan officer really never Pre-Qualified you. Unfortunatley, a lot of Loan Officers still issue Pre-Qualificaitons without ever reviewing the required documentation.

Rodney Mason, NMLS #151088
Sr Loan Officer
Prospect Mortgage
825 Juniper St NE, Atlanta, GA 30308
Office: (404) 591-2453
Apply Online at http://www.rodneymason.com
Licensed in Alabama & Georgia with over a decade of mortgage lending experience.

Prospect Mortgage offers a full selection of mortgage programs including:
Conventional | FHA | FHA 580-639 FICO | FHA 203K Renovation (Streamline & Consultant) | HomePath® | HomePath® Renovation | HomeStyle® Renovation | VA | USDA | GA Dream | Jumbo Financing.
0 votes Thank Flag Link Fri Apr 26, 2013
Are there any other options available for a loan? I know in 2007 there was no documentation and low doc loans available. It is a bit frustrating because I have the money to pay, but I can't get the underwriters to acknowledge.
Flag Fri Apr 26, 2013
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