Self - Employed Buyers

By
Real Estate Agent with Keller Williams Realty Signature Partners

We are all happy to have buyers when we get them. All buyers are equal but some are more equal than others. I have a buyer who is self-employed. He owns a successful business and does quite well income wise. However, he writes off his income to the point that he is making below the poverty level. This is fine for his taxes, not so good for qualifying for a mortgage.

My husband is a mortgage lender and took a look at the tax returns. This individual is not going to qualify for a car much less a home based on his tax returns. I just wonder what people are thinking these days when it comes to getting a mortgage. He told my husband he wanted a stated income loan. Well we are about 2 or so years too late for that one. I just hate it that a person with great income is unable to buy a home due to how he does his taxes. Maybe he will change the way he pays himself but that does not help anytime soon. It is frustrating trying to help self employed folks get into a home these days. Very few of them show enough income to qualify.

Comments (8)

Jeremy K. Frost
Keller Williams Realty - Dripping Springs, TX
Associate Broker, ABR,CNE,CRS,ePro,PSA,RENE,SRS

Thank you for sharing this valuable information and of course thanks for making it RAIN!!!

Mar 05, 2010 12:43 AM
Elite Home Sales Team
Elite Home Sales Team OC - Corona del Mar, CA
A Tenacious and Skilled Real Estate Team

This too shall pass.  We have a tendency to forget that when money is tight it is difficult to get a loan and then as thing get better then it is easy.  Time is the answer.

Mar 05, 2010 12:46 AM
Joe Cuchiara
Higher Ground Real Estate - Colorado Springs, CO

Mary...a conundrum for sure. I think at one point or another we've all experienced this type of buyer. I suppose the old adage, "you can't have your cake and eat it too" applies here. Doubt stated income loans are coming back any time soon.

Mar 05, 2010 12:47 AM
Retired from ActiveRain
Baker, OR

It is helpful if a prospective buyer consults a lender well in advance of when he or she will buy a home so that the pieces can be put in place to qualify for the size of loan the buyer wants.  Sounds like the topic for a future blog!

Mar 05, 2010 12:47 AM
Lisa Delzompo 951-704-4559
Sand to Sea Properties, Inc. - Palos Verdes Peninsula, CA
Experienced, Trusted, & On Your Mission: Home

Yes, self-employed have this happen.  They need to get ahead of the curve, amend most recent taxes and file next taxes to show income.  They have to pay tax, too (maybe amend again later?).  We also have this problem with employees with "2106 deductions" for things like their uniforms.  If they deduct $12000 per year for that, that hits their income by $1000 in debt per month.  That's a big hit.

Mar 05, 2010 12:49 AM
Mary Towler
Keller Williams Realty Signature Partners - Powder Springs, GA

I don't think too many folks are going to amend tax returns. They would have to come up with too much money when they paid the taxes they owe. I just think there will be a lot fewer self employed home buyers.

Mar 06, 2010 09:35 AM
Cal Yoder
Keller Williams Elite - Lititz, PA
Homes For Sale in Lancaster PA - 717.413.0744

How do we realtors qualify for mortgages? I need to learn some of these techniques where I show below poverty level income.

Cal

Mar 12, 2010 12:03 PM
Mary Towler
Keller Williams Realty Signature Partners - Powder Springs, GA

Well Cal, you show below poverty level income by writing off all or most of all of your income with expenses. Of course you will not qualify for a mortgage if you write off most of your income. I also would not want to go through an IRS audit if I was writing off most of my income. But that is another story for another day.

Mar 12, 2010 12:36 PM