are no doc loans making a come back?

9 Replies

I'm self employed and have a 760 credit score. Due to write offs and deprecation my tax return is not that impressive. I flipped some really good SF contracts that would of been good keepers if  I knew of a loan product that would of allowed for investors in my situation to portfolio the houses.

A good mortgage underwriter will back out the depreciation expense to get a clearer understanding of your overall finances.  Depending on your self employment expenses, they may do the thing with things like internet expense, telephone expense and auto expense if you document that these are all items that would normally be personal expenses, but you're in a position to be able to deduct them.

I hope that we don't start the same lending practices that led us to the biggest financial downturn since pre-WW2.  That would be disastrous.

I don't agree.  We are not living in the days when the car mechanic knew how to fix your car.  Now they just plug their computer into your car and find out which car part to replace, not fix.  Same with underwriters and loans.  They get their computer generated approval or decline and act accordingly.  There are no conventional manual, common sense, underwrites anymore.  

You need a hard-money-lender that ignores income and lends to you because their is equity in the home and the deal makes sense.  Granted, HMLs will typically ONLY lend on investment properties, not on your primary residence.

@Daren Eady, I disagree in part with your statement. Sure, many lenders plug and play. But I am self employed, have significant write offs and have a lender that is 1099 or W9 friendly. The types of mortgages may differ, i.e. some of these were VA, FHA and traditional lending, but depending on the objective of the borrower the lenders are out there and not all of them are ultra conservative.

Self employed people have an almost impossible time getting approved for a loan.  I have been paying my bills since 1998, but banks think I have zero income.

You just have to research to find a lender that will work with you.. I have one that I just got a loan from with no income tax returns or w-2's required. the terms just are in between hard money and normal loans. 7.5% rate 65-70% LTV and 1 point with 3 year prepayment penalty.. Min. loan of 100k.. it's a new loan for investor no doc rentals.. They don't lend on primary residents...


Ray

I have a friend who is an underwriter.  He calls me sometimes to get an opinion on tax returns in front of him (I am a CPA).  He asks me questions about clients that have self employment income and what my opinions are of certain deductions or other items he is looking at.  

The decision is ultimately with him, of course.  And he's not allowed to actually share the documents with me.  But he'll lay out a scenario, tell me what he's seeing and ask me questions.

Therefore, I know he is doing in-depth analysis of self employment tax returns.  I don't believe he's the only underwriter doing so.

Stated income loans are available for commercial and multifamily mortgages through private lenders.  You would have an easier time investing in those as a self employed individual. 

If you are going to Wells Fargo or BOA then sure you will have a hard time.  When I purchased one of my homes I had a hard time getting funding -- but my realtor connected me with an underwriter that increased my borrowing power by 30% easily -- just by taking my tax returns and understanding my situation.  It's about relationships.  You have to shop around and look for self employed friendly lenders - and not just for commercial or multifamily properties.  Because I have a relationship with the underwriters I use - now when the numbers get tight the conversation goes from "what is your income?" to "what sort of money do you need?".