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Answers (5)
- Jerry Sather, "Mortgage Geek"
- Contributions:1
Often times someone that is set up as a sole-prop will (rightfully) take advantage of the available tax write-offs and end up showing little or no income to Uncle Sam. That is great for your tax debt but makes standard qualifying for a mortgage next to impossible.
In that circumstance an option that is often overlooked or not available to many lenders is a loan that qualifies using Asset Depletion. This loan uses existing assets like Money Market Accounts, Investment Portfolios, Trust Funds or others. The value of the asset is confirmed and then a portion of that account is used to prove monthly income for the borrower. It can be pretty simple and straight forward, you just need to have those assets available. Just a note, those assets are NOT turned over to the lender, they are just verified and accounted for.
I hope that helps provide another option for you.
Good luck!
- Thomas Morgan, "tmortgan"
- Contributions:11
Brian's right - the standard documentation is two years' tax returns and a year to date income and expense statement. Hopefully you did file a Schedule C (Sole Proprietorship) for these years on your federal income tax return.
A few things to add:
1.) Most underwriters make you carry business debts personally, even though you pay them out of business cash flow. BUT, if you pay them from a separate business account, and can provide 12 months' cancelled checks (front and back) you can avoid the underwriter deducting these expenses from income AND treating them as a debt.
2.) This is the BEST time of the year for self-employed borrowers to finance, though, because you can place more emphasis on the cash-flow based profit and loss statement in the 2 year income averaging scenario.
Good luck!
A few things to add:
1.) Most underwriters make you carry business debts personally, even though you pay them out of business cash flow. BUT, if you pay them from a separate business account, and can provide 12 months' cancelled checks (front and back) you can avoid the underwriter deducting these expenses from income AND treating them as a debt.
2.) This is the BEST time of the year for self-employed borrowers to finance, though, because you can place more emphasis on the cash-flow based profit and loss statement in the 2 year income averaging scenario.
Good luck!
- Justin Sheftell, "Courtesy Mortgage"
- Contributions:3426
Submit your most recent Schedule C. Plenty of lenders will qualify off one year only if your file is otherwise strong.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
- Brian Goetz, "bri_gets"
- Contributions:295
You will have to provide the last 2 years federal tax returns, a year to date profit and loss statement, and a copy of your business license (if applicable)
An underwriter will most likely use a 2 year average of your net income. So if you wrote off a lot of expenses, this will lower your income and make it harder to qualify.
An underwriter will most likely use a 2 year average of your net income. So if you wrote off a lot of expenses, this will lower your income and make it harder to qualify.
How do we get a mortgage as a self-employed, sole-proprietorship? we are not a corporation or LLC.
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