 Long gone are the days of “Stated Income” loans. Government rules now require borrowers to prove their ability to repay loans by way of an income source. This can make things very difficult for self-employed borrowers who take heavy deductions on their tax returns. We can help with this problem......... Many self-employed people take high deductions for mileage and home offices, which crushes their qualifying limits since these deductions lower net business income. We use common-sense investors who understand these two deductions don’t really affect a self-employed person’s “bottom line”. Therefore we can qualify self-employed borrowers based on their income prior to taking these two deductions. Sample Scenario Your self-employed buyer has $76,000 in gross business income. After deducting $40,000 in business expenses, this buyer’s tax return shows a net business income of $36,000 ($3,000 per month). Of the above $40,000 in business expenses, $12,000 are from mileage and home office deductions. Because we have lenders who will add these two deductions back to the net business income number, the $12,000 in mileage and home office deductions won’t affect this buyer’s qualifications. After making this $12,000 adjustment, we would give the buyer credit for an income of $48,000 ($4,000 per month). So while most lenders would qualify this prospect using an income of $3,000/month, we would use an income of $4,000/month. That’s 33% more qualifying income! HOW YOU CAN USE THIS: For those self-employed buyers who are tight on qualifying, don’t settle for lenders who just look at the bottom-line number on tax returns. We can help you! We use a common-sense underwriting approach to help more buyers qualify! Our goal is to help you sell more homes! If you have questions, feel free to contact us any time...we’re here to help! Comments are closed.
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