Many self-employed business owners today are faced with the dreaded phrases when talking to their mortgage lender, “Your debt ratio is too high” or “You don’t report enough income on your tax returns”.  It is true that if a borrower reports no income or reports losses on the tax return as self-employed, there the options are limited but there are a lot of ways to improve the chances for self-employed borrowers to qualify for a mortgage:

What we look for when trying to qualify a self-employed borrower for a VA, FHA, USDA, or Conventional home loan:

1. On a purchase, if the buyer can put down 5% or more of their own funds and has a great credit score, we may be able to just use 1 year of tax returns for calculating income rather than averaging the last 2 years
2. Does the buyer’s company pay any of the borrower’s debts and can we prove that by proof of cancelled checks from the business to the creditor for the last 12 months
3. Depreciation or depletion can be added back to the bottom line of the returns
4. Some mileage write-offs may be added back to the bottom line of income
5. Some loans will allow a non-occupying co-borrower to help increase income for qualification
6. Using PMI alternatives to lower the mortgage monthly payment to help in qualifying.  Read about PMI alternatives & strategies here
7. Student loan payments deferred over 1 year from closing can be excluded from debts used in the debt ratio on occasion (FHA ends this exclusion on 6/15/2015, read new rules here)
8. Seller paid costs on some loans allow for the seller to pay off installment loans to help qualify
9. Higher credit scores, larger down payment, and larger amount of liquid reserves will improve chances of approval with a higher debt ratio

To learn what type of items we will need in order to calculate your debt to income ratio and qualifications, read this blog You’re self-employed, Top 5 things to do before meeting with your mortgage lender

Contact us today to let us figure (the right way!) how to get self-employed business owners into a home!