Mortgages For Self Employed Borrowers | Calculating Self Employed Income
Mortgages for self employed borrowers can be more difficult than borrowers with traditional income due to calculating self employed income. When calculating self employed income, underwriters prepare a written evaluation of analysis by using a worksheet to break down income. The reason why an underwriter uses a written analysis is to determine a borrower’s ability to repay. The ability to repay is determined by calculating the amount of stable and continuous income to qualify for a loan. The difficulty qualifying for a loan for a self employed borrower is the fact that accountants and tax preparers often are experts at reducing tax liabilities and minimizing taxable income, but underwriters often start with taxable income.
When a self employed borrower cannot qualify for a traditional loan, there are Non-Qualified Mortgage (Non-QM) options, which take a more common sense approach to underwriting. Every case scenario for a loan is unique and often weighed on its own merits, which loans are still approved based on a belief that a borrower has the ability to repay.
Non-Traditional Mortgages For Self Employed Borrowers
Properties qualify based on a debt service coverage, which means that the property must meet a certain ratio – calculated by dividing PITIA (principal, interest, taxes, insurance, and association dues) divided by the net rent.
Often it can be difficult when calculating self employed income unless a mortgage professional uses an income calculation sheet.
At Nationwide Mortgage & Realty, LLC, Mortgage Loan Originators will request documentation, verify the documentation numbers, go over credit, verify assets, and write a pre-approval based on information sent by the borrower.
For self employed borrowers, it is a big advantage to send over tax returns and all necessary documents before a Loan Originator writes a pre-approval to prevent a last minute denial.
A Borrower can choose to take an extra step and go through the TBD property pre-approval process, which an underwriter will review a complete credit application, loan application, income, and assets before writing a pre-approval.
Nicholas Auriemma is a Loan Originator at Nationwide Mortgage & Realty, LLC, providing information on mortgages that can often be confusing even to real estate and mortgage professionals. Borrowers can be discouraged because mortgage professionals can be mistaken due to guidelines always changing, the extent of guidelines, their company having an overlay (a stricter guideline), or other lenders not offering a loan program. Call or text Nick anytime at 630-779-8430 or email at firstname.lastname@example.org.
All loans are subject to credit, underwriting and property approval guidelines. Offered loan products may vary by state. There is no guarantee that all borrowers will qualify. Restrictions may apply. This is not a commitment to lend. Terms, conditions and programs are subject to change without notice. Nationwide Mortgage & Realty, LLC is not acting on behalf of or at the direction of HUD/FHA or any government agency. CO: Check license status of your mortgage loan originator atwww.dora.state.co.us/real-estate/index.htm. Also licensed in: FL. VA, and TX: NMLS ID 276777. Illinois Residential Mortgage License | MB. 6760210. WA: Consumer Loan License MB-276777. GA: Georgia Residential Mortgage Licensee 60857