All Forum Posts by: David Taylor

Solid broker, I know Dan personally. Exceptionally knowledgeable, very professional, and service oriented. Not that it means much from me, but I speak truth! 

Hi Ned,

NonQm or Non Qualified Mortgage have been around since 2008. One of the qualifying methods to prove income is to average deposits into an account. Primarily used with SE borrowers who are not reflecting "true" income on tax returns. Income is not stated but based on actual revenue. See actual language from my guidelines below.

NonQM provides a great option for those borrowers who can prove income by providing non-traditional documentation or alternative documentation other than a tax return or W-2. Some of the alternative documentation programs we offer are bank statement, 1099 Only, WVOE Only, 1 Year W-2, and Asset Depletion.

INCOME DOC TYPE-

PERSONAL BANK STATEMENTS
Provide the most recent consecutive 12 or 24-months of personal bank statements. Evaluate deposits to
verify that they are part of Borrower‘s income stream. Any that are abnormal to Borrower‘s typical deposits
must be sourced/documented to be considered as part of income. Total all eligible deposits and divide by the
number of statements provided to determine monthly income. Provide the most recent 2-months of business
statements to verify that income is coming from Borrower‘s business. Transfers from a business account into
a personal account are acceptable. Transfers between personal accounts are not considered income. A
Borrower who provides personal bank statements but does not meet the above outlined criteria will have
their statements treated as business statements.

BUSINESS BANK STATEMENTS
Provide the most recent consecutive 12 or 24-months of business bank statements. Multiple accounts may be
used; however, a combination of Personal Bank Statements and Business Bank Statement is prohibited. The
Borrower(s) must own 25% or more of the business to utilize business bank statements. All non-borrower
owners of the business must provide a signed and dated letter acknowledging the transaction and confirming
the borrower’s access to the business account for income-related purposes.

OPTION 1 | 3RD PARTY PROFIT AND LOSS STATEMENT
Provide a P&L statement prepared by a 3rd Party Tax Professional (defined as a CPA, Tax Attorney, Enrolled
Agent (EA), California Tax Education Council (CTEC) or Paid Tax Professional (PTIN)) covering the
period of bank statements provided. The total eligible deposits on business bank statements must support at
least 80% of the gross receipts listed on the P&L statement. If the deposits support the gross receipts, use the
lesser of the net income on the P&L statement divided by the number of statements (12 or 24) based on the
Borrower’s pro-rata share of ownership or total eligible deposits reported on the bank statements divided by
the number of statements (12 or 24) for qualifying income. Any abnormal or large deposits will need to be
sourced and documented. Income utilized to qualify must be reasonable based on the Borrower’s line of
work.

OPTION 2 | 3RD PARTY EXPENSE STATEMENT
Provide a letter from Borrower’s 3rd Party Tax Professional (defined as a CPA, Tax Attorney, Enrolled
Agent (EA), California Tax Education Council (CTEC) or Paid Tax Professional (PTIN)) stating the
business’ expense ratio based on the most recent year’s filed tax return. The letter must be provided on the
tax professional’s letterhead and may not include any exculpatory language. Verification and validation of
the preparer’s business/license must be provided. Multiply the business’ total eligible deposits over the
period shown on bank statements by the expense ratio provided by the tax professional to calculate total
expenses. Deduct that figure from the total eligible deposits to calculate net deposits. Multiply net deposits
by the Borrower’s pro-rata ownership percentage and divide by the number of statements provided for
qualifying income. Income utilized to qualify must be reasonable based on the Borrower’s line of work

OPTION 3 | FIXED EXPENSE RATIO
Multiply total eligible deposits by a 50% expense ratio. Multiply result by Borrower‘s ownership percentage
and divide by number of statements provided. A completed Self-Employed Business Narrative Form is
required. Any abnormal deposits will need to be sourced and documented.

DSCR financing accomplishes this.

Most DSCR lenders can fund / vest in an Entity. Some require it, and pre-payment penalty restrictions in some states also may require it.

 #2 is a solid starting point. Face to face knowledge in a comfortable atmosphere. Can't beat it.

NonQM - Bank Statement, 1099, income qualifier will work.  Rates and required leverage are higher, BUT they are viable and common alternatives.

A closed end 2nd TD might work, depending on income qualification method. Can you prove income with tax returns or bank statements? 

Closed End Second TD might do the trick. Some lenders can do up to 80% depending on income qualification method. Tax Returns vs. Bank Statements. benefits are longer terms and fixed rates. 

DSCR Financing.

DSCR qualifies the borrower’s ability to repay the mortgage based on the property’s income and performance. Simply put, if you have excellent credit and your property generates enough income to cover the mortgage payment and the property’s operating expenses you qualify subject to loan-to-value restrictions.

Mortgage payments are paid in the arrears. You most likely paid per diem interest from April 12-April 30, leaving interest for May, your first full month due on June1. Hope that helped.