Self-Employed Home Buyers
Lets get right to the bad news; There are no more "No Doc" or "Stated Income" loans for residential home buyers anymore. Based on current laws, it is illegal to make such loans so there is little chance of them being offered in the future.
All is not lost, however, as there are some alternatives for the Self-Employed buyer. For Starters, we are excellent at reviewing your tax returns and finding extra income that many lenders overlook. This is a real benefit because it means you can get financing at regular interest rates.
We are also quite good at discovering other solutions, like restructuring some debt, getting a temporary co-signor or using other lending loopholes.
The No IRS Forms Loan Program
For Self-Employed borrowers with a large down payment and good credit, we have some alternative ways of documenting income that does not rely on tax returns or checking with the IRS.
One: 12 months bank statements and Profit & Loss. Here we will review your last 12 months bank statements and a CPA prepared Profit & Loss statement covering the same period to determine an income stream to be used in qualifying.
Two: Asset Amortization. With this method we will simply divide your total eligible asset balances by 360 to determine a monthly income stream. This works great for buyers who show substantial money in the bank but not a lot of taxable income.
To be elgible for the No IRS Forms loan at least one borrower must have a 25% ownership interest in a business and be able to document 2 years current continuous self-employment with a business licence verified by a third party (such as government entity or borrower's business attorney). Borrowers whose self-employment cannot be independeantly verified are not eligible.
If one borrower is self-employed and one is a W2 employee we can still combine the income. The W2 employee must provide copies of their last 2 yrs W2s (no tax returns) and 1 full month of pay stubs.
Business Entity Lending
If you buy a property in the name of your business entity (i.e. Your Corporation or LLC) we are able to do a "Stated Income" loan. However, the potential market rent of the property less vacany factors must be able to cover the monthly payment with some margin. The down payment amount can vary depending on several factors, including the debt service coverage ratio of the property.
Your Next Step
If you are thinking of buying or refinancing a home in the near future, we suggest getting a no-cost or obligation review of your financial picture. As we mentioned above, we are quite good at finding hidden income so we always recommend showing us your last 2 years Federal Tax Returns to see if we can qualify you for a regular loan. If we determine that this is not a feasable option, we will move onto the other loan programs in our arsenal.