Specialist · Eugene, OR · Member since 2019 · 9 posts · 1 vote
Hi everyone,
My wife and I are self-employed and finding it difficult to qualify for traditional financing. Imposible actually. I stumbled up bank statement loans and just spoke with a loan officer for an hour asking all of my questions. It seems that I need to raise my credit score from 720 to 740 to get the absolute best rate and come in with 15% down while I currently only have 10%. This will take me 2-4 months to save the money and while we are itching to get into the world of REI yesterday, I'm wondering if there are any other loan options I should be looking at? Even with 15% down and a 740 credit it will be roughly high 4 or low 5 for the interest rate.
How long have you been self employed? Are you working with the same commercial banker who handles you business banking? Are you showing a paper loss for tax purposes?
@Ryan Webster I've been self employed for a little over 3 years. Our last two tax returns have shown very marginal income of about $35k each year. I started with my bank that handles my business and personal accounts but my income is too low for their DTI ratios. They don't take into account that my business pays for a lot of my bills that most pay personally. I only draw for my mortgage and food.
Not sure what you are trying to achieve other than acquire a property. Do you plan on living in the property or just for investment? Are you going to own the property under your name or under your business or an LLC? If it is an investment then you could look at doing it under your business potentially. Not sure what sort of work you do.
@David Kazarian sorry should have clarified. I’m looking to purchase my first investment property. Either a single family home or a duplex that we are looking to hold and rent. My business is a children’s retail store. I’m just wondering if there are any other self employed members that show a low income on their returns but live debt free and save money and how they go about getting financed. It may just be my market as well since homes are $260k on average. Even with 20% down we don’t qualify due to our income.
You can do low doc or stated income loans. The rates are going to be higher because there is not a lot of documentation so that means more risk for them.
@Ryan Webster I’ve been self employed for a little over 3 years. Our last two tax returns have shown very marginal income of about $35k each year. I started with my bank that handles my business and personal accounts but my income is too low for their DTI ratios. They don't take into account that my business pays for a lot of my bills that most pay personally. I only draw for my mortgage and food.
Herein lies your problem. You can't have your cake and eat it too. If you show Uncle Sam that you made no money, that's what the banks will say. I suggest not writing off everything this year to better position yourself for 2021.
It's either that or you find a lender who does no income verification type of loans but those start in the high 5s low 6% range, not optimal.
You could also do a loan based on the market rents and disregard your income and job altogether. This program's rates are higher than bank statement loans 4 to 5 :/. We do bank statement loans and I'd say we're a beast because of the various ways to get it done.