- Many buyers are purchasing a home with a down payment as little as 3%.
- You may already qualify for a loan, even if you don’t have perfect credit.
- Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.
How to Get a Mortgage if You’re Self-Employed
From how we’re expected to file our taxes to a lack of paycheck stubs to sometimes wild swings in income, the self-employed are a different breed. Applying for a mortgage when you lack W-2s, doesn’t disqualify you; you’ll just need to work harder to meet the higher burden of documentation required of the self-employed. buying a second home
According to a study commissioned by one of the large real estate aggregator sites, the self-employed earn 81 percent more money than other borrowers but receive 40 percent fewer mortgage loan quotes. Let’s take a look at some of what this group of homeowners need to know when applying for a home loan. buying a second home
The lender will want to see your past two years’ tax returns (and all accompanying schedules) to prove your income. Recently released Fannie Mae guidelines may allow a borrower with only one year of tax returns so speak with your lender if you’re in this situation. With the two years of returns, the underwriter will typically add the two adjusted gross incomes and then divide the sum by 24 to arrive at your average monthly income. buying a second home
The problem with this is all those expenses we use to reduce our taxable income. After calculating them on Schedule C, guess where that reduced income figure goes? That’s right — in the “Adjusted Gross Income” column on your 1040. So, even if you make a decent income, it won’t look like it on your tax returns. buying a second home
The solution to this is painful. “If buying or refinancing a home is in your three-year plan, don’t write off every business expense you can write off,” Patrick Ruffner, vice president of mortgage lending at Chicago’s Guaranteed Rate mortgage company tells US News. buying a second home
Next, the lender will look at your debt-to-income ratios (DTI) to determine how much you can safely afford to borrow. The two ratios they look at are the “front-end,” which should not exceed 28 percent of your income and the “back-end,” which needs to be 36 percent or less of your income.
Although the required ratios are outdated on this page, it will tell you how to determine your DTI. It’s important to note that the DTI ratios aren’t set in stone and lenders often approve borrowers with back-end ratios of up to 43 percent, according to BankRate.com.
Lower your DTI by either paying down debt or raising your income. Easier said than done for the self-employed, right?
Can The Mortgage Process Go Completely Digital?
Technology is making the process of getting a home loan more efficient than ever before, but can it remove the paper trail completely?
Advances in technology have essentially re-invented TV, music, mobile phones and most other industries in the past 10 years. Currently advances in technology are finally starting to modernize the mortgage process. buying a second home
As the tech savvy millennial generation prepares to purchase their first homes, some experts say they will gravitate toward digital tools. Furthermore, recent home buyers tend to have higher income and a more-educated background than in the past, this means that they are more likely to shop on the internet (and probably apply) for mortgages online. buying a second home