{"id":682,"date":"2015-05-22T15:12:04","date_gmt":"2015-05-22T15:12:04","guid":{"rendered":"http:\/\/teammovemortgage.com\/2014\/10\/07\/self-employed-borrowers-and-qualifying-for-a-mortgage-loan\/"},"modified":"2020-07-13T22:35:05","modified_gmt":"2020-07-13T22:35:05","slug":"self-employed-mortgage","status":"publish","type":"post","link":"https:\/\/teammovemortgage.com\/blog\/self-employed-mortgage\/","title":{"rendered":"Self Employed Mortgage Loans Are More Obtainable Than You Think"},"content":{"rendered":"

Many self-employed business owners today are faced with\u00a0two dreaded phrases from a mortgage lender.\u00a0\u00a0“Your debt ratio is too high”.\u00a0 The other is “You don’t report enough income on your tax returns”.\u00a0 Now, if a borrower reports no income or reports losses on the tax return as self-employed, options are limited.\u00a0 But there are a lot of ways to get a self employed mortgage loan.<\/p>\n

Self Employed Mortgage Tricks<\/h2>\n

First of all, a business owner should not try to figure mortgage income from the tax returns.\u00a0 Lenders look at self employed <\/a>mortgage income differently and it isn’t just the bottom line.\u00a0 Actually, there are many figures that may be added or subtracted to<\/p>\n

\"self<\/p>\n

the bottom line.\u00a0 This is where an experienced self employed mortgage lender helps.\u00a0 We are going to dig deep to see if a mortgage loan approval is possible.\u00a0 But keep in mind that the best way to get an accurate approval is to provide complete documentation up-front!<\/p>\n

Qualify With One Year of Tax Returns!<\/h3>\n

In a self employed mortgage search, the first request will be 2 most recent years of tax returns<\/a>.\u00a0 But there are programs that allow for using just 1 year of tax returns.\u00a0 That’s right, using the most recent filed tax return is possible!\u00a0 For instance, on a Freddie Mac<\/a> conventional loan, it is possible to receive a mortgage preapproval that requires just one year.\u00a0 Certainly the chances of this approval improve with higher credit scores and overall strength of the file.\u00a0 Using one year of tax returns works for either newer businesses or a business that had a tough prior year.<\/p>\n

Adding Back Deductions to the Bottom Line<\/h3>\n

Again, don’t try to figure out the numbers yourself!\u00a0 The actual self employed income may be much different than the tax return <\/a>income.\u00a0 Actually, it could be better or worse.\u00a0 Each of the mortgage agencies have differing requirements for calculating self employed income.\u00a0 But for the most part, there are some deductions which could be added back.\u00a0 These could help a business owner qualify for a mortgage.\u00a0 First is depreciation or depletion.\u00a0 Businesses that own property, vehicles, or equipment may be able to add back right much.\u00a0 Both may be added back to the bottom line.\u00a0 Additionally, part of the business miles may be added back to income.\u00a0 This is accomplished by multiplying the IRS mileage depreciation rate times the business miles.\u00a0 Then, occasionally “other expenses” may be added back.\u00a0 These other expenses that could be added back include amortization expense or a one-time expense.\u00a0 A one-time expense could include a vehicle purchase, theft or storm damage,\u00a0or a remodel of a business.<\/p>\n

Excluding Personal Guaranteed Debts Paid by Business<\/h3>\n

Ok, what if the income is now figured and the debt ratio is still too high?\u00a0 That’s where proving the business pays debts can help in a big way.\u00a0 For instance, a car loan<\/a> or credit card paid by the business may be excluded from the borrower’s debt ratio.\u00a0 So this could be big time.\u00a0 In order to exclude these debts, the following must be done:<\/p>\n