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Replies (29)
- Tammy Stockdale, "Colorado Mtg Broker"
- Contributions:6995
I've done 6 SIVA's this year, one just closed 2 weeks ago. They are still out there, however, that being said, all of them had 750+ ficos, tons of liquid assets and S/E in the same job for years.
I think you are right, it's not really fair to the S/E borrower. I know for myself, I write off a ton, so it looks like nothing on the tax returns. They should create a formula for the S/E borrower adding back in a percentage of the write off's and depreciation, if not just add it all back in period.
- Justin Sheftell, "Courtesy Mortgage"
- Contributions:3428
If the SE borrowed properly and legitimtely itemized their returns, their qualification standard would be equal to the W2 borrower. Yes, both pay for gas, but the SE borrower is supposed to only deduct gas used for business, not for personal.
Business use of home, depreciation all get added back into the income qualification. What doesn't get added back in are REAL TANGIBLE ACTUAL BUSINESS expenses. If they chose to only deduct those items they would have an easier time qualifying for financing.
SD- but the tax code is set up so that people cheat. It's just the way it is, and they do make out like bandits in terms of taxes they actually pay- don't get me wrong. I see what you are saying, but let's assume they are not doing anything illegal (which this person is not).
Tam- they may still be there, but the rates are much higher... blegh!
- Tammy Stockdale, "Colorado Mtg Broker"
- Contributions:6995
I just did one at 6.75%, really not bad considering....well everything!
- Justin Sheftell, "Courtesy Mortgage"
- Contributions:3428
Yep, but the tax code makes it harder for W2 to "Cheat" than for SE. So if we are talking fairness, I think it balances out. A smart SE borrower will make sure to file strong returns if a home purchase or refinance is planned. A super-smart SE borrower will then AMEND their returns a year or 2 after they get their home loan!
The whole reason we have 4506T is because people used to have two sets of returns, one for the lender, and one for the IRS!!
- Daniel Thierry, "Dan Thierry CRMS"
- Contributions:3
Conforming allows the add-back of home office expense to income I believe. There is still a source of two for stated income with decent rates but the program was abused so badly I would be surprised to see stated income survive into the new year. Consumers should adjust and say..start paying their income taxes.
- Tammy Stockdale, "Colorado Mtg Broker"
- Contributions:6995
Developed a 142 Point Quality Assurance Program for every loan
Dan, is that like the 142 pt inspection when someone buys a used car?
- Andrew Adams, "203K Specialist"
- Contributions:9349
I am pretty sure the tax code is not set up so people can cheat! That would mean that the govt is OK with people cheating.
Cheating is a choice if you make that choice you have to live with the consequences.
- Daniel Thierry, "Dan Thierry CRMS"
- Contributions:3
New car dealers are on the cutting edge of customer service, used car dealers sometimes not so much..so I guess the answer is no but thank you for asking.
AA- when there are loopholes, the system is set up to enable people to cheat. If they didn't want people cheating, they would close said loopholes. That's just my opinion. But be gentle, or I will cry. ;)
And like you always say, they don't make the rules, they just play by them. If they can off every little thing they eat, drink, do, advertise and drive, they will.
I agree, they should pay taxes. 15% across the board, no deductions. If everyone paid what they should, everyone else wouldn't have to pick up the slack.
- Clay Branch, "Georgia Loans"
- Contributions:7838
Eliminate the tax system for the consumption tax.
- Kevin Hancock, "khancockloans"
- Contributions:24
In my experience, if SE borrowers make actually make enough money to qualify for the loan, but their tax return doesn't show it, they are writing off more than they should.
- Martin Wareing, "Martin Wareing"
- Contributions:3772
The biggest problem that SE faces...... lower credit scores.... Yes, they write off everything... the hard part is they didn't "write" enough checks on time (lower credit scores). The pristine SE borrower will come back to life... The dude who really doesn't make enough money because he would not have debt out the wazoo or a MOR credit score is dead meat. You can't hose "Sammy" and get pull one over on "Fanny" anymore. Pretty simple to me. Keep rockin'.
I agree with all you guys are saying about how much they write off- but the fact remains that w2 borrowers are qualified at their adjusted gross income. So, if they 'wrote off' everything an SE borrower does, they'd probably end up in the same spot- not much to show for their income.
- Martin Wareing, "Martin Wareing"
- Contributions:3772
hence the plight of the "commissioned" borrower... same thing.
- eatwell
- Contributions:8
Frankly, I'm kind of ticked off at the assertions made here and on other boards against Stated Income mortgage shoppers. The fact is, not everyone's financial situation is the same and the issue isn't whether someone deserves to get a loan but whether that person can pay it back. I'm self-employed, have a credit score over 800, have virtually no debt, tons of assets, and have never missed a rent, mortgage, or any other payment (except by postal snafu) over the course of twenty+ years. We currently pay over $3000 a month in rent, and that's approximately the same as what we would pay in mortgage and tax payments. The chance we would miss a payment is nil. I would love to buy a house, yet the message I'm getting is I won't be able to get a loan.
Please don't PM me, but if you're curious about the finances of an actual SE person, rather than making up moralizing fairytales about the average tax-cheatin' Joe, just ask and I tell you.
- Andrew Adams, "203K Specialist"
- Contributions:9349
If your income is on your tax returns you will not have an issue.
If your income is not reflected on your tax returns you will have a problem.
No assertions are being made Stated loans are few and far between. Freddie pulled their Stated program last week. The only other programs I know of are 30% down and rates above 10%.
- Rob Cochems
- Contributions:3523
eatwell,
It just the times, financing will be harder for you to obtain then it was 1 year ago.
- Clay Branch, "Georgia Loans"
- Contributions:7838
eatwell, I am in your corner. I believe you are much less risk than a first time homebuyer, going full doc and barely has 2 months reserves.
- Clay Branch, "Georgia Loans"
- Contributions:7838
eatwell, sounds like you have options since you have " tons of assets ".
- Martin Wareing, "Martin Wareing"
- Contributions:3772
eat,
You are the exception... not the rule for S/E people.. In fact your credit score is the exception..not the rule for all people same goes for your assets. Do not throw yourself in the same group that is being singled out..If your adjusted gross is very low and not many "addbacks" on your 1040's, there could be additional resistance, but the vast majority of people struggling to borrow are like a BIGGIE SIZE combo meal at WENDY's...Either high debt-ratioed W2 borrowers or Self-employed....with little or no verifiable income..little or no assets.....middle of the road or worse credit scores.... That combo meal is very costly... You would not want to loan to that person and neither will anyone else (because we are taking them all back). That is a very easy lending or denial decision. With a score above 800, you are in the top percentile of borrower profiles that anyone would want to do business with. No need to affiliate yourself with the problematic borrowers (self-employed or W2). Your are S/E and an entrepreneur... Many people that call themselves S/E are/were really folks masquerading as a company with "credit" and credit lines. They "trickerate" numbers and revenues and actually have piles of debt behind the scenes and when "credit" dries up.. they do to. Keep rockin'.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Andrew, currently on a Conforming SISA, the max LTV is 75% on O/O and 70% on 2nd homes. 30F about 6.750%. Minimum midscore 730.
- eatwell
- Contributions:8
Andrew, some of the income is not shown on our tax returns (family gifts), and much of it consists of capital gains (derived from my "ton of assets" heh-heh). Some income and assets are from my spouse, who is a foreign national, and is no longer working (but could, if necessary).
Unique, I would prefer not to buy the house for cash as it would remove our safety net, not to mention my portfolio is currently down 25%...
Choice, I went over to the freddiemac site and saw the program you were referring to (http://www.freddiemac.com/sell/factsheets/alt_stated_income.htm). What do you think the rate would be for a 5/1 ARM as opposed to a 30F?
- Andrew Adams, "203K Specialist"
- Contributions:9349
Freddie has discontinued that program or will be shortly. Within 30 days.
eatwell,
If the income is not on your tax returns it will not be used in qualifying. Dou you need to go with a stated program or is there a chance you qualify based on what is on your returns.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Eatwell, my lenders do not have a 5/1 or any ARM. Only 40/30/20/15 fixed rate. And, they changed max LTV on O/O to 70%. 1st X homebuyer OK. No payment shock. 25 day lock 6.375% on 30F.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
That's a CA rate.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Andrew, I don't know when, but surely SISA will go away. If SIVA does the same SE's with high net worth can still go the pledged assets route. Since there is lower risk, these may stay around. The question is, will we?
- Andrew Adams, "203K Specialist"
- Contributions:9349
RC,
I was notified this week that Freddie is no longer offering sisa/siva. That may be we have decided to no longer originate them but that would be outside of the norm. Typically we do not add overlays to agency guidelines.
- Rudi Hofmann, "LUXURY HOME LOANS CA"
- Contributions:7435
Andrew, I believe you.
The plight of the self-employed borrower
Well, it seems the topic of the day is 'Stated Income' loans (just kidding, the topic, as usual, is fake reviews!). While I have done a fair few of these in my time, I have done exactly 0 so far this year, it's just too difficult, and the rates are stinky. I was just talking with someone who needs to refi and is self-employed, and it hit me. The self-employed borrower really is given the shaft. Let me explain. Let's say a self employed borrower has a gross income of $75,000. They write off their home office, their truck, their gas, their food, their uniforms, their EVERYTHING. After all of those expense deductions, they are left with $20,000 a year, not nearly enough to qualify for the mortgage they want, even though that mortgage payment is all they will be paying for WITH that $20k.
Now let's look at a w2 borrower. They make $100,000 a year, pay 25% in taxes. They are now down to $75,000. They buy gas, food, and booze. They pay two car payments. They pay all sorts of bills, including an obscene $300 a month for cell service, and at the end of it all, they too end up with about $20k a year.
How is this fair? How is it that we go off of GROSS income for w2 borrowers, but adjusted gross income for self-employed borrowers? What is the rationale behind that?
What would be a fair way to remedy this situation?
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