Mortgage Financing for Self-Employed Borrowers
There is hope… The method of calculating income for independent contractors, those paid via 1099s and business owners is definitely antiquated and desperately needs updating but in the meantime there are alternative lending solutions for those seeking mortgage financing. The local bank on the high street may not be able to help but there are mortgage brokers with access to a greater range of home loan programs including those which will accept deposits on bank statements as proof of income versus tax returns. Home buyers may also want to look at the option of having their spouses or partners qualify as salaried borrowers instead while it may not matter for those looking to refinance thanks to no income verification requirements on some new government sponsored programs. Real estate investors may find that proof of income isn’t needed at all, especially when it comes to flipping houses as they are able to borrow under a corporate name. This is generally true for applying for rehab loans, hard money lending and transactional funding as well as for utilizing non-recourse mortgages for acquiring bulk packages of distressed single family homes and commercial real estate. For those self-employed borrowers who are still struggling to get a mortgage it may also be time to re-evaluate how taxes are being filed and balance the pros and cons of showing more income in order to qualify for a better home loan. While this may not sound appealing at first it is also critical to point out that the IRS has begun cracking down on those who are filling minimal salaries (i.e. the often recommended $12,000 base). There is a point when trying to save too much on taxes can backfire.
Self-employed borrowers are having a tougher time getting home loans than ever and with new Fannie Mae rules being rolled out it could get even tougher. So is this the end of mortgages for all but those with bloated government W2s or are there still options?