SELF-EMPLOYED BUYERS

Michael Holigan: Barbara Reeves is a self-employed real estate broker who recently bought a new town home. She says her experience has taught her what every self-employed home buyer needs to remember. Have patience.

Barbara Reeves: The less they put down, the harder the process is going to be. So, knowing that, and remembering that will save you some stress. You know, I only had five percent to put down. So I'm going to be hassled about everything that I turn in. How long I've worked there, how good my records are, how wonderful my income is. I'm going to have to do all kinds of explanations about my credit. I'm going to have to do the maximum amount for the minimum amount of down payment.

MH: Self-employed people have an easier time getting a loan than you may think. It does require a lot of documentation, paper work and patience. First of all, lenders prefer that you be self-employed for at least two years. Next, they'll want to see the last two years of income tax returns. The last two years of business tax returns if you're incorporated along with a current balance sheet and a profit and loss statement. They'll also require credit reports that you will pay for. This loan will be made on both you and your company's financial status. Lenders will take your last two years income, average them together and this will show how much home you can afford. Although there are some exceptions. If you are self-employed in the same field as your previous job, you may not have to wait two years to qualify for a loan. If your income dipped in the last year, you may be able to provide statements from previous years to help with qualifying. And if your down payment is 30% or more, some lenders may not require you to verify all your income, although the loan may carry a higher interest rate. Barbara says you may feel like the amount of information your lender is asking for is a lot, but putting yourself in their shoes can help you understand why it's necessary.

B.R.: And I probably have a little more empathy for the situation because I've just had so many clients that have gotten mad at the loan officer and, "No, Barbara, I'm not going to give him all that. No.". You know, it's like going to the doctor. They want to give you a complete physical examination to go with this. But it's part of the process and you don't have a paycheck stub for them to go back on, because they have to look into your records, they have to find out how much adjusted gross income and what did you really bring in and how much did it cost you to bring that money in.

MH: If you're self-employed, you need to find a lender who's experienced with this type of loan. There are some tight restrictions. A good lender can guide you through the process and minimize the hassle.

 

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Episode 47 1996 - 97 Season

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