Prior to 2008 the Self Employed were handed a gift by lenders when Stated Income Mortgages were allowed. NO DOCUMENTATION required. Suddenly the self-employed didn’t have to weigh the benefits of showing more income and paying higher taxes in order to qualify for a home mortgage against writing everything off and paying less taxes only to be told they either don’t qualify or they can’t qualify for the home they want.
Currently the self-employed are stuck between a rock and a hard place in order to qualify for a home mortgage. Lenders now want everything documented as proof showing the stability of the borrower and their company.
What are the options for a self-employed potential home owner who has the finances to pay a mortgage but no proof of doing so. There are really only two options:
1. Stop writing everything off. Speak to a financial adviser/loan officer/CPA and determine what you need to show as income in order to qualify for a mortgage. If you want to be in the $500,000 price range ask how much income do I need to show on my tax returns. Then find out how much more in taxes you are going to need to pay. Decide if you need to adjust the amount of purchase and go from there. Pay your taxes for two years and then go for it. Of course, you need to be aware that in those two years home values or interest rates could increase.
2. Accept that this is the price of self-employment and figure out what you can qualify for now and just get your foot in the door of home ownership. Eventually values in homes will increase and you will be building your own equity. When you buy your first home there is nothing that states you have to live there for the rest of your life. When the market turns in your favor; hopefully you will have also taken advantage of the guidance your financial advisers gave you and paid a little more in taxes to show your increase in income and in time you can buy the home of your dreams.
I guess there is a third option and that would be a co-signor. This person needs to be someone that you trust and is in good financial condition as well.
Mike and I highly recommend the second option and just get your foot in the door of home ownership. Be open minded to areas that originally would not have been acceptable, remember this won’t be your only home you own, and think of this purchase as a stepping stone. You have to live somewhere and why not pay your own mortgage not someone else’s.
Warm Regards- Gayle
Gayle Fujita Ramsey RA SFR-808-388-1485
Mike Ramsey Fujita RA SFR- 808-630-1828
http://GreatHawaiianHomes.com
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