The challenge with self-employed borrowers is that often time you take advantage of the tax laws and write off a good portion of your expenses to reduce your tax liability. This is a great tax strategy, but can come back to bite you if you write your income down to level that shows you do not qualify for the mortgage that meets your needs.
The mortgage industry changed substantially after 2008, and unfortunately one of the casualties were loan programs that were for our self-employed borrowers. Fortunately, there are now a couple of options for our self-employed borrowers.
The Bank Statement Loan Programs allows us to use deposits into your bank account in-lieu your tax returns. We simply take the total deposits into your bank account for the previous 12 or 24 months and will use that average as your income. There will be an expense deduction based on the type of business. For example, as service business will have a much smaller expense deduction than a manufacturing business. Also, any deposits or money transfers that are unrelated to the business will be excluded.
The Asset Utilization Loan Program is another option for self-employed borrowers. This loan program allows us to use the qualified assets of a borrower to derive a usable monthly income number. We use this for borrowers that have substantial monetary assets but whose income is not enough to support qualifying for a mortgage
Please feel free to reach out with any additional questions. You can either complete the form to the right, call 713-677-4101 or email lee@nxtgenmortgage.com