Hey everyone! I’m trying to get a loan from that won’t they won’t have to consider my business. My W2 income alone would qualify me for a $600,000 loan but when they apply the losses some of my businesses took I can’t get any loan except for a business statement loan and they want me to put down 25%. Is anyone able to help?
This is a common predicament for self employed borrowers.
Your CPA is always going to do everything they can to help you reduce the amount of money that you 'made' on paper.
Your Lender is always going to want to go off of whatever your CPA says that you 'made' on paper.
If you can prove that some of those business expenses were 1 time expenses and will not be likely to reoccur, the lender should be able to exclude those specific expenses which would give your net income a boost.
This is a common predicament for self employed borrowers.
Your CPA is always going to do everything they can to help you reduce the amount of money that you 'made' on paper.
Your Lender is always going to want to go off of whatever your CPA says that you 'made' on paper.
If you can prove that some of those business expenses were 1 time expenses and will not be likely to reoccur, the lender should be able to exclude those specific expenses which would give your net income a boost.
@Allen Collins this might be hard for you to answer but do you know what TYPE of loan you are receiving? It almost sounds like you are receiving a "conventional" loan? And this is for an investment property, correct? Sometimes people post here about primary homes even though we are a real estate investing website. Is your W2 income from a company that you own? Or is it from another company that you just work for type of thing. I am hoping you are being prequalified...and not under contract. If you are being prequalified I would highly recommend going to a different lender right away. If you feel comfortable answering those questions I can provide a little better guidance.
@Allen Collins this might be hard for you to answer but do you know what TYPE of loan you are receiving? It almost sounds like you are receiving a "conventional" loan? And this is for an investment property, correct? Sometimes people post here about primary homes even though we are a real estate investing website. Is your W2 income from a company that you own? Or is it from another company that you just work for type of thing. I am hoping you are being prequalified...and not under contract. If you are being prequalified I would highly recommend going to a different lender right away. If you feel comfortable answering those questions I can provide a little better guidance.
Hey Andrew, thanks for the response! I should have stated this is a home for me and my family. We currently own a single family and plan to keep that one as an LTR. My W2 income is from my businesses, we are just pre-qualified at this point. For the bank statement loan it's 25% down with a high interest rate. I am trying anything I can to avoid putting so much down so I can keep my reserves to improve the property I purchase.
This is a common predicament for self employed borrowers.
Your CPA is always going to do everything they can to help you reduce the amount of money that you 'made' on paper.
Your Lender is always going to want to go off of whatever your CPA says that you 'made' on paper.
If you can prove that some of those business expenses were 1 time expenses and will not be likely to reoccur, the lender should be able to exclude those specific expenses which would give your net income a boost.
That's very interesting I never thought about that, I will have to browse over my statements and see if anything stands out that would be a one time purchase. Thanks for the input!
Bummer, yeah. Keep in mind you can always add back the depreciation loss.
There are some DSCR products lending up to 85% in the market right now. Rates aren't great, but it gets you the house. There's a corny saying going around the lending community right now, "Date the rate, Marry the house". You can always refi if rates go back down. DM me if you want more info.
i would recomend a DSCR loan if it cash flows. rates are somewhere around 7-9%....alittle more than conventional financing but atleast you would get into the property.
@Allen Collins thanks for replying here. Sorry that I have been a little busy this week but hope my responses here aren't too late. A couple of pointers:
1. DSCR loans are not for your primary home - those are for investment properties.
2. If your W2 is from your own business, your income is still "self-employed" income and your tax returns must be used in conjunction with your qualifying income if you are trying to get a traditional, conventional, conforming, Fannie Mae/Freddie Mac (or whatever other name that lender is calling it). This money comes from Fannie/Freddie. Their money, their rules. FHA/VA/USDA all have similar rules. Basically any loan from the "Federal Government" is going to want to use those "Federal Government Tax Returns" as a part of you qualifying.
3. The "bank statement" loan comes from the lenders own money. So that loan can ignore things (aka: be more flexible) but you pay for that flexibility with a higher rate or higher downpayment.
Anyway, my suggestion is still to get a second opinion from another lender. If you haven't filed your 2021 tax returns a good lender would show you how to file so that you can qualify for a loan you are seeking.
Anyway, this may not be what you wanted to hear but it's probably what you need to know. Get a second opinion and let's see if someone else can qualify you for more.
If your W2 income is $500k/year but your business loss is $1m/year why would a lender be interested? At the end of the day you are burning through $500k/year. Not sure why anybody would lend in that scenario.