Self Employed Mortgage Question

[dimag333]

Hey , you self employed guys and gals, I am having a really hard time getting a mortgage being self employed for the past 3 years, have any of you done the bank statement style mortgages instead of tax return applications?

I really barely have any personal bills so I don'r really pay myself too often and I can't see get the crap taxed out of me just to show more income.

Kind of a unique problem but I am sure after 2008 there are other business owners who have ran across this issue

steve

[Valenciawatchrepair]

Oh Lord, I messed with this crap. I've been forced to Rent the past 2 years, which was higher than my previous mortgage. What a ridiculous system. Good luck finding a bank statement style company. I don't have any advice other than see what you can do BEFORE you sell your home if you're in one. I learned it all the hard way.

[dimag333]

Originally Posted by Valenciawatchrepair

Oh Lord, I messed with this crap. I've been forced to Rent the past 2 years, which was higher than my previous mortgage. What a ridiculous system. Good luck finding a bank statement style company. I don't have any advice other than see what you can do BEFORE you sell your home if you're in one. I learned it all the hard way.

dude, I was able to get a mortage when our income was total less than 60K in nj, now I couldn't even get a mortgage for the house I am in since I am self employed, such bs man

steve

[tyler1980]

if you dont pay yourself you have no income technically. Maybe the business could buy the house if the money is "in the business" still?

[Valenciawatchrepair]

Originally Posted by dimag333

dude, I was able to get a mortage when our income was total less than 60K in nj, now I couldn't even get a mortgage for the house I am in since I am self employed, such bs man

steve

I couldn't get financed on the cheapest manufactured home. $40K. It's a joke. Someone with a minimum wage job can get more credit than me.

Sent from my Moto G (5) Plus using Tapatalk

[MKIVdan]

I am self employed and in the real estate industry. You are going to have to find a good mortgage broker who works with self employed people to really help you out on this one. Some paper loss items on your tax return can be added back in to help boost your income for the loan.

There are other programs out there for self employed people as well, such as bank statement loans where they take 12 months of bank statements add up the deposits and divide by 12 to come up with your monthly income. Your credit must be very high for this type of loan and typically you need 25-30% down and the interest rate is a little higher but at least you will get a mortgage.

Feel free to message me if you need any more help

[dimag333]

Originally Posted by MKIVdan

I am self employed and in the real estate industry. You are going to have to find a good mortgage broker who works with self employed people to really help you out on this one. Some paper loss items on your tax return can be added back in to help boost your income for the loan.

There are other programs out there for self employed people as well, such as bank statement loans where they take 12 months of bank statements add up the deposits and divide by 12 to come up with your monthly income. Your credit must be very high for this type of loan and typically you need 25-30% down and the interest rate is a little higher but at least you will get a mortgage.

Feel free to message me if you need any more help

yeah I am working with 2 pretty good brokers, but it's tough since my credit is mid 600's because of business stuff being on my personal credit and really needing to take paychecks, for what it is worth we file as s corp no llc so hands are a bit more tied on how we take our income, I might pm you, my good friend Joe Oz is out by you actually with KW, he has done very well out here on the east coast

steve

[dimag333]

Originally Posted by Valenciawatchrepair

I couldn't get financed on the cheapest manufactured home. $40K. It's a joke. Someone with a minimum wage job can get more credit than me.

Sent from my Moto G (5) Plus using Tapatalk

yep I went from 50K to close to 500K going through my accounts a year in less than 36 months and I am worse off! I was actually thinking about getting some bs work from home fulltime job just to show employment hahah


steve

[CamSLC]

I used washington federal, but it's been about 4 years. It was a very detailed process but they got it done relatively fast. I had been self employed for only a year and a half at the time.

[dimag333]

Originally Posted by CamSLC

I used washington federal, but it's been about 4 years. It was a very detailed process but they got it done relatively fast. I had been self employed for only a year and a half at the time.

I might have to hit them up, thats crazy under 2 years!

steve

[bayerische]

Well, kinda the same here. Business owners aren't worth much.

Luckily I'm past that stage, being self employed since 2003, and shown proper salaries to my self, and having had A LOT of debt, that I managed to pay off well. We don't have a credit score per se, but mine would be pretty high.

[Watchflair]

Maybe I'm crazy but wouldn't you want to pay yourself from the business... Show a salary etc.

[Jocke]

I have been self enployed since 1989 and have no dept, a good income and the banks ask me now and then if I will loan some money.

Nope is my answer, I don't need your money and I feel good to be free.

Maybe I'm dumb that will die without depts, but I sleep very well.

[bayerische]

Originally Posted by Jocke

Maybe I'm dumb that will die without depts, but I sleep very well.

I’d say you are smart.

[dimag333]

Originally Posted by Watchflair

Maybe I'm crazy but wouldn't you want to pay yourself from the business... Show a salary etc.

there are a number of reasons why you would not want to take a big salary, the biggest being taxes, ask your boss how much it costs him in payroll taxes, payroll fees and other assorted fees (like workmans comp) to pay you a dollar, depending on a variety of factors it could be up to 50% in my case.

Also when you are a business owner alot of your personal bills become business bills, like my car, I don't use it at all for personal use, thats like 12K a year alone. I only pay myself what I need, the rest sits or gets reinvested in the company to grow

steve

[Watchflair]

Originally Posted by dimag333

there are a number of reasons why you would not want to take a big salary, the biggest being taxes, ask your boss how much it costs him in payroll taxes, payroll fees and other assorted fees (like workmans comp) to pay you a dollar, depending on a variety of factors it could be up to 50% in my case.

Also when you are a business owner alot of your personal bills become business bills, like my car, I don't use it at all for personal use, thats like 12K a year alone. I only pay myself what I need, the rest sits or gets reinvested in the company to grow

steve

I get all of that as my wife now runs her family business - they just celebrated their 100th anniversary. Most business owner's that I know still pay themselves a salary etc that supports their lifestyle - it all has to make sense. Side not I also run a business(not an owner though) so I get how all of the taxes etc add up.

[dimag333]

I do pay myself a salary, pretty much on par with my old one

steve

[sokoloka]

Starting to dip my toes in the water on this as well - looking around to see what's out there for asset based lenders as an option.

[Valenciawatchrepair]

Originally Posted by Jocke

I have been self enployed since 1989 and have no dept, a good income and the banks ask me now and then if I will loan some money.

Nope is my answer, I don't need your money and I feel good to be free.

Maybe I'm dumb that will die without depts, but I sleep very well.

After playing the stupid credit game and then this self-employed mess, I'm trying to get where you are. Good for you!

[Etschell]

Originally Posted by tyler1980

if you dont pay yourself you have no income technically. Maybe the business could buy the house if the money is "in the business" still?

completely untrue. unless he owns a c corp which would be unlikely. in the us flow through entities have ascribed income to the owner whether distributed or not.

[breitlings]

Originally Posted by tyler1980

if you dont pay yourself you have no income technically. Maybe the business could buy the house if the money is "in the business" still?

I am sure the OP is talking about being paid as an Pass Through Entity. In which case you write off the business expenses against revenue which lowers your taxes but you are responsible for "Self-Employment Tax" (although I recall some instances under S-Corp where you fully subjected to self-employment tax but it was really complex). I do not think a business can buy your primary residence without raising some questions about the business being a separate entity.

Under Trump's plan though there may be a tax advantage though in becoming a C-Corp and paying yourself and then declaring dividends. However, you'd have to ask an accountant, it's a fairly new area.

[Etschell]

Originally Posted by Watchflair

Maybe I'm crazy but wouldn't you want to pay yourself from the business... Show a salary etc.

you want to pay yourself as little of a salary as possible and take advantage of perks as well as distributions. payroll taxes are no fun.

[Etschell]

Originally Posted by breitlings

I am sure the OP is talking about being paid as an Pass Through Entity. In which case you write off the business expenses against revenue which lowers your taxes but you are responsible for "Self-Employment Tax". I do not think a business can buy your primary residence without raising some questions about the business being a separate entity.

Under Trump's plan though there may be a tax advantage though in becoming a C-Corp and paying yourself and then declaring dividends. However, you'd have to ask an accountant, its a fairly new area.

you never want to own a c corp unless you must. ie you plan to grow it to a public company or you have no choice based on irs rules for sales thresholds.

[dimag333]

yes I elect s corp-all pass through, draw is tricky though with s corp election and the books have to be on the level

steve

[breitlings]

Originally Posted by Watchflair

Maybe I'm crazy but wouldn't you want to pay yourself from the business... Show a salary etc.

You almost always want to minimize salary to the point where it is the "lowest reasonable", even in C-Corp. One of the jobs I was applying for was 20% salary and 80% dividends.

[breitlings]

Originally Posted by dimag333

yes I elect s corp-all pass through, draw is tricky though with s corp election and the books have to be on the level

steve

S-corp draw was tricky. I learned that last semester. This semester I learned that the prompt and demands of a project aren't trivial and aren't always given...

[dimag333]

Glad I’m not crazy!

steve

[breitlings]

Originally Posted by Etschell

you never want to own a c corp unless you must. ie you plan to grow it to a public company or you have no choice based on irs rules for sales thresholds.

You can add take institutional funding to that. Most VCs will only invest in a C-Corp to protect their tax status, and will need a company to capture gains out of an LLC. Overall not a lever I want to negotiate. I agree that a C-corp is a PITA but I think under the new tax laws there are reasons for a C-Corp, like you can a low business tax rate, pay yourself minimum reasonable salary and be in a low tax bracket, then dividend the rest at 15-20% without self-employment tax and end up with a total effective rate lower than an LLC. I am not 100% sure though and I've been told no one is 100% sure yet.

[Etschell]

Originally Posted by breitlings

You can add take institutional funding to that. Most VCs will only invest in a C-Corp to protect their tax status, and will need a company to capture gains out of an LLC. Overall not a lever I want to negotiate. I agree that a C-corp is a PITA but I think under the new tax laws there are reasons for a C-Corp, like you can a low business tax rate, pay yourself minimum reasonable salary and be in a low tax bracket, then dividend the rest at 15-20% without self-employment tax and end up with a total effective rate lower than an LLC. I am not 100% sure though and I've been told no one is 100% sure yet.

for a small business an s corp or partnership is the best. trust me on this one.

the point is simple though to the op. if you are self employed provide your tax returns. if you have limited history it will hamper your interest rates. self employed people are more risky to a lender.

if he provided the facts to me i could opine as to why he is getting rejected.

[breitlings]

Originally Posted by Etschell

for a small business an s corp or partnership is the best. trust me on this one.

the point is simple though to the op. if you are self employed provide your tax returns. if you have limited history it will hamper your interest rates. self employed people are more risky to a lender.

if he provided the facts to me i could opine as to why he is getting rejected.

I understand but I would argue an LLC is easier than an S-corp (but there can be some tax advantages to an S) and LLPs have some questions about liability protection in states that don't have LLPs. I think the OP was discussing how his income looks lower because expenses are written off from the business revenue and may show an income below what a bank will lend at for a given house.

I've heard of revenue based lending. I have no experience with it though.