Getting Qualified for a Home Loan and being Self-Employed

It wasn’t too long ago that home loan officers could offer a so-called, “SISA” loan – which stood for, “Stated income, Stated assets.”  All a loan officer had to do was pull credit and make sure the borrower’s FICO score was decent, and they were off to the races!  As you can well imagine, those days are long gone.  Not only is SISA gone, but “No Doc” loans are gone too.  That is generally good news for responsible banking practices, but it can hurt self-employed borrowers with lots of legitimate write-offs.


Despite a radically different lending environment, it is still very possible for self-employed borrowers to qualify for a home loan.  Tax returns are still the gold-standard and necessary for underwriting, but that is something a highly qualified loan consultant can help you with.  If you’re a self-employed person applying for a loan, here are some things to keep in mind:

• If you are newly self-employed, you must have a two year history of self-employment before you can use that income to qualify.
• You will need to provide your last two years of Federal tax returns – business and personal.  Make sure you have K1′s available if you receive them.
• The chances are strong that you will also need to provide a YTD profit and loss statement along with bank statements to show that your business is stable.
• If your income has been declining, the underwriter will probably take a worst-case scenario calculation rather than an average of the past two years.
• Depreciation and depletion can usually be added back (because it is a non-cash expense), so if you are involved in a business with a lot of depreciating assets, this will help your qualifying numbers.
• If you have filed a tax extension we will need to see proof of the extension.
• If you have liabilities (such as a car payment) that are being paid by the business, if you have 12 months of cancelled checks to prove the business is paying, that liability can be removed so that you are not “double-dinged” for it.

There are many nuances to working through tax returns to help qualify self-employed borrowers, but it is totally doable for well-trained loan consultants.  If you have any questions, never hesitate to call us to talk it through or even get an analysis of your scenario.

Getting Qualified for a Home Loan and being Self-Employed

Buying a Home with only 3.5% down-payment

I run into a lot of folks who think they have to amass a huge down-payment in order to buy a home.  Nothing could be further from the truth.  With an FHA loan, you can put as little as 3.5% down – and with conventional you can put down as little as 5% if your credit is decent.  Take a look at how reasonable that number is relative to purchase price:

Purchase Price     3.5% Down

$150,000                  $5,250 down

$200,000                 $7,000 down

$250,000                  $8,750 down

$300,000                 $10,500 down

$350,000                 $12,250 down

$400,000                 $14,000 down

$450,000                 $15,750 down

$500,000                 $17,500 down

$550,000                 $19,250 down

$600,000                $21,000 down

$650,000                 $22,750 down

$700,000                 $24,500 down

$750,000                 $26,250 down

Think about that.  That gives you a lot of purchasing power!  You can even use gift funds towards the down-payment and non-occupying co-borrowers to qualify for the loan…  If you’ve been sitting on the sidelines because you don’t think you have enough saved up for a down-payment, think again.  There are many affordable options to consider.

Buying a Home with only 3.5% down-payment