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Profile picture for LauriesShoppin

Self Employment and the Home Loan?

My husband quit his job in accounting a few months ago to open up his own firm.  Unfortunate timing, as we are also adding to our family and need to move into a larger place.  We rent now.  We'd like to buy and aren't sure how to get a loan, as he writes his own pay checks.  His company, not surprisingly, will show a loss for the first year.  We have $25,000 up front and are looking to spend $200,000.  Is it still possible to secure a loan on our own, or will we need a guarantor?

Thanks!

  
  • February 19 2010 - Baltimore
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Answers (7)

Profile picture for tonygim
No.  You will need 24 months of solid taxable income.  They will look at the bottom of Schedule C and view that as similiar to a salary.  And, tax returns to prove you have income.

If he will make no income for the next year maybe it is better to stay where you are.
  • February 19 2010
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Profile picture for Felix Quist
Absolutely correct to what Tony said. Need to show a history (2years) of income.
  • February 19 2010
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As both Felix and Tony have mentioned your husband will need two full taxable years of self-employment.

Hint: When he starts filing his S/E Federal Tax Filings be sure not to declare less than 45% in adjusted (Form 1084) Debt-to-Income. Otherwise, you still may have problems. .... Best wishes, Rudi 
  • February 20 2010
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Profile picture for rockinblu
Hi guys,

I don't mean to hijack this thread, but I have a question along these lines. My son has had many consecutive years of verifiable income as an independent contractor. In the past year he was an employee for about nine months, but has since chosen to go back as an independent contractor. He will be selling a low seven figure house and downsizing to about a 500k condo, however his DP may end up being just 100K. If he hasn't had any credit problems within the last 20+ years do you see a problem anywhere? Guessing his current income at about 200K, but it's commission and bonus based. 
  • February 20 2010
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Profile picture for Texas Banker
There is no such things as stated loans right now, you have to show income.

Non-occupant co borrower is possible in some situations, credit wise you still need to qualify.
  • February 20 2010
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@ rockinblu - your son may want to consider a Security Based Loan. He could take the profit from the sale of his house and put it into the market so that he could pledge securities in order to get a loan. The rates are 2.5% to 4.5% fixed interest-only and are paid quarterly. We can lend up to 80% of the value of what was pledged. It takes about 2 weeks to get the loan and there are no income or employment verification requirements
  • February 22 2010
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Profile picture for rockinblu
@Zac

Thanks for the reply. He's a little too conservative for that approach now. Once burnt, twice shy. If ever Mrs. Rockinblu and I would become buyers again, heaven forbid, it sounds like something more up my alley. Again thanks for the suggestion.
  • February 23 2010
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