A Good Mortgage Broker Can Help You Navigate the Approval Process
2013 will long be remembered as the year the federal government slowed up the housing recovery by making mortgages much more difficult to obtain. Only history will tell us if the stiff medicine was good in the long term. But if getting a mortgage got harder for those with a pay stub, it certainly also became even more difficult for the self employed.
Assuming that you are filling out a schedule C, your tax return will be the primary method of establishing your income. Generally, the lender will average the last two years of net income. However, if the most recent year shows a decline, they may only use the second year.
If you know well in advance that you are planning to get a mortgage, you may wish to change some of your accounting practices. We all know that there are many ways to count various aspects of revenues and expenses, and that the normal inclination is to keep net income low, and thus pay lower taxes. However, you may want to show more income leading up to the mortgage application, even if this results in higher taxes.
If it is too late to bulk up your earnings, you might consider doing an amended income tax return. In addition, a skilled mortgage broker may be able to help you with notes to your return that would include adding back certain expenses, such as depreciation or one time charges, without doing an amendment.
Some lenders have more stomach than others for the self employed, and/or a greater understanding of the nature of schedule C income. Since mortgage brokers have multiple lenders to turn to for your mortgage, they have a better chance of finding a favorable loan environment.
Stated income loans are another possibility. While these fell out of favor after the crash, there are times when they can be used in today's mortgage market.
Our capabilities in all of these matters has increased over the past week, in that we have changed our primary broker and lender relationship to Guaranteed Rates, Inc. As one of the largest lenders in the US, Guaranteed Rate has the ability to place loans at great rates, and to do so quickly and with the least possible headaches. Guaranteed Rate has a proven track record of making the process incredibly smooth for borrowers. Please note my new contact information below.