We all know the challenges that self-employed individuals have when it comes time to qualify for a home loan. Being self-employed, you have the opportunity to write off as many expenses as you can, which helps you show a lower net income and pay less federal income taxes.
Unfortunately, that works against you when it comes time to qualify for a home loan. That net income figure is the same number we use as your income for qualifying. Note that there are some adjustments to that net income figure for depreciation, meals and mileage which can make the final figure a bit different than what’s showing on your taxes.
The message here is we don’t use your sales as your qualifying income – just your net income.
Here’s a scenario that happened just the other day. A self-employed gentleman came in to qualify for a home loan, and he had written off almost all of his expenses, and he had very little net income. He didn’t have very much net income to use for qualifying for the big home he was wanting to purchase.
We dug deep and found a program that’s making a comeback. It’s called a bank statement program. We take the last 12 to 24 months of personal or business bank statements, add up the deposits into that account, and use that figure as his income. We were able to use his last 24 months of personal bank statements, count those deposits as his income, and help him qualify for that big home he was looking to purchase.
Now, this program is not for everybody. You have to have a down payment and a certain credit score, but this can certainly help some self-employed people who have the cash flow and are in a position to be able to qualify for a home that they otherwise couldn’t qualify for simply based on their tax returns.
If you have a scenario like this, contact me to discuss how this program might be of benefit.