Mortgages: How Self Employed Buyers Can Qualify For A Home Loan
Getting a home mortgage for borrowers who are 1099'd independent contractors is based on the businesses net profit from their federal taxes
. There are new rules and laws that stipulate lenders to confirm a borrower's ability to repay the loan by this method.
Who Fits Into The Category of Being Self Employed?
If you own greater than 25% of a business, the mortgage underwriter will consider you to be self employed. The underwriter will consider you to be self employed if you file a 1040 schedule C for your job income, are an independent contractor, or your employer does not take out any income taxes.
Things you can do to better qualify for a mortgage loan
Keep a personal banking account and a separate business bank account. The treason for doing so is to pay any bill pertaining to business paid from that particular account. Debts that show on your individual credit report can be taken out from the qualifying debt ratio if you are able to show that the bill is paid by the business.
Normally, you'll have to provide cancelled checks, copy of front and back, for the past twelve months from the business account. If you forgot and paid one month from your personal account or paid in cash, or bill payments are mixed together with personal accounts - then that particular debt must remain as a debt under your debt ratio calculation.
Get Help from a Co-borrower
A person who is considered a co-borrower will generally live in the home as well as be on the title with the primary borrower. Both income and debts of borrowers and co-borrowers are joined to calculate if the debt ratios qualify.
Get Your Business listed
Underwriters will confirm a business inception date most of the time for two years. The most popular methods to achieve this are through a CPA letter , a business license, or a business listing in the local phonebook yellow pages.
Please consult your tax adviser or CPA before making changes to your business.