Real Estate
February 25, 2020
link to facebook link to twitter
More Stories
Paying off debt to buy a house can be challenging Your income is a lifeline to finance a home How to plan the optimal time to buy a rental property How to make your financial profile less intricate A factor that can drive your mortgage cost up How child support and alimony can affect your ability to get a mortgage What to look for when getting a mortgage on a manufactured home Why getting a 30-year fixed-rate mortgage is a smart financial move How to lower your cash to close when buying a home What you need to know about securing a VA mortgage Mortgage payment relates to purchase price What to expect mortgage rates to change in the upcoming months Loan limits for 2020 make getting mortgage easier Three reasons to buy home at end of year Can you get a mortgage with bad credit? Income and all outstanding loans are key factors to obtain a mortgage How to get a mortgage without providing tax returns The new way to get a mortgage with 1 year income tax returns Four common home buying mistakes to avoid How to create wealth with your income and finances Should you buy a house with monthly mortgage insurance? 2019 conforming loan limits rise FHA loan limits for 2019 increase No more VA limits in Jan. 2020 Should you cash out to refinance What makes the most sense? Three pricey loan scenarios to watch A surefire way of making loan process a hassle Changing income and job status may affect mortgage chances Six common mortgage loan scenarios How to lower your debt to income when getting a mortgage Three reasons you should not buy a home Types of loans based on credit score How the FHA 100-mile rules your ability to rent or buy Three quirky issues that will hurt your mortgage Seven common mortgage mistakes Why your mortgage payment keeps changing The credit score it takes to get a mortgage What to expect in today’s loan process? How 1031 tax-deferred exchanges work Six to avoid when purchasing a home How to use rental income to qualify for a mortgage Mortgage inquiry makes your credit score drop? Why waiting for mortgage rates to get better is a losing proposition Transfer property to family and be protected under Prop 13 FHA requirement might hurt buying chances Purchase price should not be most important factor Finances matter when buying a home Could the 30-year fixed mortgage get to 3 percent? Mortgage rate sounds too good to be true How the mortgage process gets ugly if you have a difficult picture Should you go FHA or conventional for purchasing your first home? Two mortgage process problems you will want to avoid Home value when refinancing What you need to know about the mortgage 4506-t document Don’t make mistakes when getting a mortgage refinance Should you buy and build or buy a single family home? How expensive your mortgage will be due to bad credit? The loan process and what not to do Should you refinance with today’s mortgage rates? Be careful getting a mortgage if you have a bankruptcy Cash-out refinance or home equity Lender knows how to purchase business? Read the fine print Cash to payment formula when buying a home A bank statement program might help get a mortgage Pulling credit may not make sense Why the VA mortgage is the best home loan Can you use roommate income to get a mortgage? Best benefit for your first-time home buyer A loan program you may be eligible for based on your credit score Be wary about paying off this type of mortgage Common questions on financed mortgaged insurance loans Things that affect your first-time buyer mortgage options Self-employed income The #1 mistake consumers make when getting a mortgage… How much are closing costs when you purchase a house? Two mortgage loan programs get a better interest rate How much of your mortgage income should be going towards an auto loan? Five quirky refinance scenarios that work Working two jobs makes now easier to get a mortgage How mortgage lender credits work

A non-traditional program for self-employed mortgage borrowers

By: Scott Sheldon
July 5, 2019

Traditionally, self-employed mortgage borrowers are more heavily scrutinized by mortgage companies because of their gyrating income. If their business stops the revenue stops and their ability to make a mortgage payment could be impacted. That’s the rationale behind why lenders look at self-employed borrowers more stringently.

Lenders request both personal and/or corporate returns from self-employed borrowers. Lenders generally must average these returns out over a two-year period. Not a bad thing if you’re showing enough income, but absolutely could be problematic if one year was strong and another year was bad.

A non-traditional way of securing mortgage financing is to use alternative forms of income documentation especially if your tax returns don’t paint a favorable picture.

One such method is to use a bank statement program. Know this-bank statement programs vary from lender to lender. The more relaxed from a guideline standpoint, the pricier your mortgage will be. Your biggest goal when getting alternative forms of qualifying should not be rate and cost, but it should be payment and ability to qualify-that should be your focus. It goes without saying that you’re going to pay more for such type of financing than if you supplied traditional supporting documentation in the form of federal tax returns.

Some characteristics of bank statement loans:

At least a 680-credit score with no previous derogatory credit of any kind that means no bankruptcy, no short sale and no foreclosure.

You’ll need at least 25 percent down or a 25 percent equity position in the house if you’re refinancing.

Up to a 50 percent debt to income ratio can be considered

As previously mentioned the rate and the pricing associated with such a program is going to be more than if you were going with traditional financing, so for example, traditional financing for 30-year fixed rate mortgages with excellent credit and super strong equity in the property for a single-family home is hovering just a hair under 4 percent now.

This would mean that for a non-traditional program it’s realistic that you would be paying to the mid fours or a low five range possibly even paying one discount point associated with your mortgage.

If you’re looking to do this when you pick a lender, provide them with everything they ask for and that includes letting them pull a copy of your credit report and run their ratios, run their calculations and provide them all the supporting financial documentation they request. Not half of the information, not part of the information – you must be willing to just accept that when you have a unique financial situation you must be willing to provide them with all of your supporting documentation, so they can pragmatically tell you how they can help you be successful on your purchase or refinance.

Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at www.sonomacountymortgages.com.