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Relocating, purchasing a business and disclosing self employment

I'm trying to figure out a way to purchase a business and get a mortgage at the same time. I know the rules for self employment are rough (2 years of earnings history). As of two weeks ago, I worked for a company, have W-2's with solid income for the last two years and good credit. I would have no problem getting a mortgage. I have left that job and am purchasing a business that is the same as the business I worked for. Let's say I worked at a McDonalds and am now going to purchase a McDonalds. If I relocate to purchase my new business and pay myself enough through payroll to show paystubs with income in line with what I had previously been making and have yet to show any business income or loss on my tax returns since I am doing this all in a period of a few months, will I need to disclose that the money earned in my new position is actually from a business that I own? Any help would be appreciated! 
  • July 07 2009 - Cape Coral
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Answers (8)

The question I have is what type of assets do you have and how much are you putting down. My mortgage broker says it depends on if you buy the house first - it might be doable.  You probably have significant assets - since you are buying a business and you can use those to prove that you have the ability to purchase the house.  Make the home purchase reasonable - easy in Florida - and talk over how to put yourself on paper.  Hey retirees buy houses all the time without income - just assets.  Call Kevin Reeves at 813-728-4992 or kevinsreeves@gmail.com
Hope this helps :)
  • July 08 2009
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Profile picture for chesteroo
Thanks for all the responses everyone. I knew it was tricky if not impossible. This is really where a no or low doc loan is needed because I will have a ton of deductions in my first year in business, so it will take 3 years before I show enough business income to be approvable. The absurdity of this is that I am taking over an existing business that is very healthy and if I became an employee there for just 4-8 weeks, I would have no problem obtaining the mortgage. It would be a transfer within the same business. But, by becoming the owner, it will take 3 years!
  • July 08 2009
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Property values in FL will probably continue to drop for the next two year. With the money you'll save by renting now, may help you support your new business. .... Best wishes, Rudi Hofmann
  • July 07 2009
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Not happening..Newly self employed in a new area.  You have no track record of being self employed and have not demonstrated an ability to run a business successfully.  If you were the bank...whould you loan yourself money?

I have no doubt you intend to pay the loan back but if you really step back and look at it, you would have to agree that it would be a very risky loan.
  • July 07 2009
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Here is the definition to being self-employed:

An individual who operates a business or profession as a sole proprietor, partner in a partnership, independent contractor, or consultant.

On the loan ap you will need to mark self-employed and if you don't fill it out in person, you must notify your loan consultant that you are self-employed so the application is accurate.

You will need a 2 year history.
  • July 07 2009
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I don't plan on putting down any information that is not true. I guess the question is will I be asked if I am self-employed. Some mortgage applications that I have filled out have asked if I own 25% or more of the business that I derive my income from, other applications have not asked that specific question. I wonder if somewhere along the way, will those lenders that have not asked that question eventually ask that question?
  • July 07 2009
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In today's environmnet, this is about as tricky as it gets.  Idea number one is do not lie on any form that you complete.  That is a very bad thing these days.  I do not believe any of the automated underwriting systems will approve you.  That means you need a good plan B (by the way, you and I are in exactly the same position - I just moved to Nashville from Chicago and am trying to build a new business and a new house).  My strategy is to make friends with a local banker then put up an interest reserve for two years.  That really gives him piece of mind that you will not be missing any payments (he is just drawing down on your account each month).  There may be other ways but none that I know of without cheating.

Good luck.
  • July 07 2009
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Chesteroo,

Lenders have ways of checking who owns a busines (such as checking Dun & Bradstreet), so don't count on sneaking by without them knowing. Unfortunaely most lenders will not use your income with such a short period of ownership.
  • July 07 2009
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