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Answers (11)
- Andrew Adams, "203K Specialist"
- Contributions:9349
"Problem is when deductions and losses are taken into account and income for qualifying is averaged over a two-year period."
You do know that gross receipts are not the same as income?
Every Business I know of has expenses and overhead that need to be accounted for. To consider cash that goes to expenses and overhead as income is just wrong! if the deductions are real and not fabricated how can you spend the $$ in two places? I could use that trick!
You do know that gross receipts are not the same as income?
Every Business I know of has expenses and overhead that need to be accounted for. To consider cash that goes to expenses and overhead as income is just wrong! if the deductions are real and not fabricated how can you spend the $$ in two places? I could use that trick!
- Pasadenan
- Contributions:21466
No one questions whether the stated income loans had a valid purpose nor whether everyone abused them, nor whether they could be used responsibly or not.
The only issue is they tended to be abused because they were so easy to abuse. Anyone that wants a loan that has income to make the payments can document it. It isn't hard, unless the information was falsified.
And again, most business take 2 years before one knows if they are going to be stable or go out of business. Most new business fail within the first two years. So looking at only one year of records is foolish. If the previous year was a "bad year" then get 5 years of income records. After all, you post "but a self-employed person must have at least two years averaged."
So, go back enough years to get the income records needed! And if they are not sufficient? No big deal; file amended returns and pay the extra tax by just omitting some of the business costs and some of the losses.
The only issue is they tended to be abused because they were so easy to abuse. Anyone that wants a loan that has income to make the payments can document it. It isn't hard, unless the information was falsified.
And again, most business take 2 years before one knows if they are going to be stable or go out of business. Most new business fail within the first two years. So looking at only one year of records is foolish. If the previous year was a "bad year" then get 5 years of income records. After all, you post "but a self-employed person must have at least two years averaged."
So, go back enough years to get the income records needed! And if they are not sufficient? No big deal; file amended returns and pay the extra tax by just omitting some of the business costs and some of the losses.
- Ray Blindauer, "SigmaWealth"
- Contributions:246
Hi, Andrew,
If I "state" the actual income, it's not a lie. Problem is when deductions and losses are taken into account and income for qualifying is averaged over a two-year period. A W-2 employee can have only his current year income used for qualifying, but a self-employed person must have at least two years averaged.
From a long-term perspective, I don't see that a W-2 employee has any more job security than a self-employed person. It could be even less. The W-2 employee can be fired or laid off when cutbacks happen. With a self-employed person, the last person to be let go is himself.
I'm also not suggesting that these types of loans were abused. They were. I am merely pointing out that there are situations where used responsibly, these loans served a valid purpose and not every single stated-income loan produced the borrower or the agent lied about the income.
If I "state" the actual income, it's not a lie. Problem is when deductions and losses are taken into account and income for qualifying is averaged over a two-year period. A W-2 employee can have only his current year income used for qualifying, but a self-employed person must have at least two years averaged.
From a long-term perspective, I don't see that a W-2 employee has any more job security than a self-employed person. It could be even less. The W-2 employee can be fired or laid off when cutbacks happen. With a self-employed person, the last person to be let go is himself.
I'm also not suggesting that these types of loans were abused. They were. I am merely pointing out that there are situations where used responsibly, these loans served a valid purpose and not every single stated-income loan produced the borrower or the agent lied about the income.
- Andrew Adams, "203K Specialist"
- Contributions:9349
Ray,
If they state an income and do not have the ability to document that stated income...how is it that not a lie? They are either telling you a lie or they are telling uncle Sam a lie!
If they state an income and do not have the ability to document that stated income...how is it that not a lie? They are either telling you a lie or they are telling uncle Sam a lie!
- Ray Blindauer, "SigmaWealth"
- Contributions:246
Hi, Andrew.
It's difficult to predict future income for any self-employed borrower. These days, if there were a stated-income product, it will require a minimum of 30% down or 30% equity and an excellent FICO.
If I had to choose between brokering a stated-income loan for a client whose "income" I have seen and a client who has poor credit and nothing down, I would bet the stated-income borrower would be more inclined to make his payment any way possible since he or she has more at stake in the home.
I'm not trying to be argumentative. Just pointing out that not all stated-income candidates are crooks or liars and that today, there are more riskier loans being made every day to low-FICO, low-down borrowers than any stated-income loan that exists.
It's difficult to predict future income for any self-employed borrower. These days, if there were a stated-income product, it will require a minimum of 30% down or 30% equity and an excellent FICO.
If I had to choose between brokering a stated-income loan for a client whose "income" I have seen and a client who has poor credit and nothing down, I would bet the stated-income borrower would be more inclined to make his payment any way possible since he or she has more at stake in the home.
I'm not trying to be argumentative. Just pointing out that not all stated-income candidates are crooks or liars and that today, there are more riskier loans being made every day to low-FICO, low-down borrowers than any stated-income loan that exists.
"If you're putting 30% down, there are lenders in California who will make a loan to you, with alternative income documentation"
Are you talking about hard money Brian, if you are, you should specify that. Also, I noticed that there is no record of you in the NMLS directory nor is there any Brian Brady employed with World Wide Credit Corporation according to the California DRE. I do however see a Debra Brady but I'm sure that you would never originate mortgages using someone else's license so I'm curious as to where the link to yours is.
Thanks.
Are you talking about hard money Brian, if you are, you should specify that. Also, I noticed that there is no record of you in the NMLS directory nor is there any Brian Brady employed with World Wide Credit Corporation according to the California DRE. I do however see a Debra Brady but I'm sure that you would never originate mortgages using someone else's license so I'm curious as to where the link to yours is.
Thanks.
- Brian Brady
- Contributions:117
- Andrew Adams, "203K Specialist"
- Contributions:9349
Ray,
Seriously...what happens if 2012 is not tremendous and the folks you gave a loan too based on that tremendous year...can't afford the loan!
- Pasadenan
- Contributions:21466
And 2011 income cannot be used as a prediction for 2012. So, what is wrong with requesting a few more years of back tax records from the IRS?
I'm self employed and have owned my business for well over a decade. And there was one year recently where the entire accounts receivable was only $5k. It has never prevented me from getting loans, and never hindered fiscal management nor covering expenses. It is the opposite. Lenders continue to offer 0% interest on credit cards.
I'm self employed and have owned my business for well over a decade. And there was one year recently where the entire accounts receivable was only $5k. It has never prevented me from getting loans, and never hindered fiscal management nor covering expenses. It is the opposite. Lenders continue to offer 0% interest on credit cards.
- Ray Blindauer, "SigmaWealth"
- Contributions:246
It is quite possible for someone who is self-employed to have a business loss or two that prevents him or her from qualifying. It is also quite possible for a self-employed person to have had a tremendous 2011 and a not-so-good 2010 where the average prevents him or her from qualifying. Not everyone who can afford a loan and who does not qualify is stealing from the government.
- Pasadenan
- Contributions:21466
Why don't you just get those clients to file amended tax returns to declare all their income rather than trying to use the tax money they are steeling from the government for the down payment?
If one reported their income to the IRS as required by law, it would not be hard at all to have sufficient documentation of income.
(Overhead money spent as "expenses" is not usable income for making loan payments).
If one reported their income to the IRS as required by law, it would not be hard at all to have sufficient documentation of income.
(Overhead money spent as "expenses" is not usable income for making loan payments).
Looking for lite doc or stated loans with 20-30% down are these programs still around in California?
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