Are you Self-Employed & Hoping to Apply for a Mortgage in Will County and Chicagoland?

Mortgage and Lending with NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 IL Lic 031.0006220/WI
Are you Self-Employed & Hoping  to Apply
for a Mortgage in Will County and Chicagoland?

     From a Mortgage Lender's perspective, the most complicated Will County and Chicagoland Mortgage Applicant is often the Applicant that is Self-Employed.


      Full Documentation Loan Files are demanded in today's Will County and Chicagoland Mortgage lending.  IRS transcripts are requested (and received) on the vast majority of Mortgage Loan Applications.  With Self-Employed Borrowers, the only way to verify income (and expenses) is through an Individual U.S. Tax Return and the Tax Returns filed by the business they own.  And that is true whether that business is a Partnership, Corporation, (S, C, or LLC), or otherwise.


      In most cases, no paystubs exist, as the potential Borrower's business is not paying the Self-Employed owner as a consistent wage like they do an employee.  The same is generally the case for W-2's. Often, no regular monthly deposits of a consistent amount are available for review either.  So, the end analysis rests solely on the business and personal tax returns filed.  Those, in turn, are supported by Tax Schedules and Bank Statement Activity.  


     So you say ... what's the problem?

      As a rule, the majority of Self-Employeds incur expenses in the course of conducting their business.  There are tax advantages to them for reporting those expenses ... and again, the great majority of Self-Employeds take full advantage of their expense "write-offs".  Typically, tax advantage expenses are shown on tax returns as a means to reduce income ... which in turn, reduces the amount of taxes paid by the Self-Employeds.  That is the whole idea of filing in this manner and the advantage found in doing so.


      Unfortunately, when those Self-Employeds try to secure a Mortgage loan, this advantage ... reflected on their tax returns as "reduced" income (Net Income), serves as that Self-Employed person's "Qualifying Income" that is reviewed by the Underwriter. 


     There is really no guesswork in this equation.  Net Income after expenses ( some exceptions and "add-backs") is what a Will County and Chicagoland Mortgage Banker and Underwriter use to determine a Self-Employed Borrower's income level.  I arrive at the Net Income by reviewing the Self-Employed's last two (2) years of filed Income Tax Returns.
      Often times, an Underwriter requires that a Year-to-Date Profit and Loss Statement from the Self-Employed Borrower be submitted.  This is especially true if the loan is being made in the 3rd or 4th Quarter of the yearIn some case files, only the most recent tax year documents are required, but often times two (2) years are needed.

      For that reason, it's a rule-of-thumb lending requirement that a Will County and Chicagoland Borrower be Self-Employed for a minimum of two (2) years in order to qualify for a Mortgage Loan.  This two (2) year history of reported income can also apply to those that are Commission Employees, or 1099 wage earners that serve as Independent Contractors (IC).


      While all of these rules and guidelines are often viewed as overly rigid and inflexible, quite honestly, they make sense. There are cases where less than two (2) years of these types of income are allowed and "approvable".  But in the context of this post, we'll refer to those as rare exceptions.


     The bottomline is:  What the IRS knows and has on record for these kind of Borrowers is what a Will County and Chicagoland Mortgage Lender's Underwriter will see ... and even more importantly, must use for determining income.  

      Self-Employeds hoping to make application for a Will County or Chicagoland Mortgage must understand that fact and know that HOW they file their Tax Returns for the two (2) years previous to their Mortgage Application will impact their ability to borrow money.  Like every other taxpayer, a Self-Employed's tax returns must be a fair and accurate depiction of their true income.


  Are you a Self-Employed person hoping to Buy, Refinance, or Construct a home in a Lincoln-Way Community, Will County, or elsewhere in ChicagolandContact Me Today!  I'll put my 36 years of Mortgage experience and expertise hard to work on your behalf so you can become a successful new homeowner.
     I can be easily found at:
Direct:  815.524.2280
Cell or Text:  708.921.6331
eFax:  815.524.2281
Click HERE for a FREE Mortgage Consultation!
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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656


Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 


Your Referrals & Testimonials are Always Greatly Appreciated! 




Re-Blogged 1 time:

Re-Blogged By Re-Blogged At
  1. John Meussner 01/22/2014 11:14 AM
Lending / Financial
Illinois Will County
Chicagoland and Northern Illinois Real Estate
Buyer Information - What Buyers Need to Know in Today's Market
buy a home
selfemployed apply for mortgage
obtaining financing when selfemployed
will county chicagoland selfemployed

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Brad MacKenzie
Brad MacKenzie - Duxbury, MA
Turning Houses into Homes on the South Shore

There sure are a lot of hoops for the self-employed! I'm glad you are there to help them out.

Jan 22, 2014 04:17 AM #1
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

I appreciate that, Brad!  And yes, a few more steps .. but manageable with some help and guidance ...


Jan 22, 2014 05:05 AM #2
Maria Gilda Racelis
Home Buyers Realty, LLC-Manchester, Bolton. Vernon,Ellington - Manchester, CT
Home Ownership is w/in Reach. We Make it Happen!

Good Evening Gene: I think there would be no other better gauge or determine the self-employed borrowers qulification other than their tax returns. It also makes sense why 2 years of most recent tax returns are required to see the pattern.

Jan 22, 2014 07:12 AM #3
Kathleen Daniels
KD Realty - 408.972.1822 - San Jose, CA
San Jose Homes for Sale-Probate & Trust Specialist

Gene, I know this all too well.  I've been watching my write offs carefully. It's why I was able to refinance last year. Not showing enough "net income" had been an issue years prior.

Jan 22, 2014 09:55 AM #4
John Juarez
The Medford Real Estate Team - Fremont, CA

When I was a bank manager I often was in the position of reviewing the tax returns of a self-employed business person who was applying for a loan…for a car, for a house, for business purposes or just for a credit card.

Often, the tax returns, properly and legally completed and filed, showed little taxable income.

So how was it those applicants who showed so little income had excellent credit…were often homeowners…were often driving newer cars…were often excellent bank clients with valued deposit relationships?

Their cash income was not the same as their taxable income.

So…the no-doc loan was born!


Jan 22, 2014 10:08 AM #5
John Meussner
Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA, - Walnut Creek, CA
#MortgageMadeEasy Walnut Creek, CA 484-680-4852

Well done Gene, a very well deserved feature.  Since every business owner does their taxes differently, this is truly the most complicated situation since it's always case by case.  There are so many rules and exceptions to the rules that the only way for a borrower to get a reliable pre-approval is to use a mortgage banker that's familiar with tax return income calculations, like yourself.

Jan 22, 2014 10:51 AM #6
Paul McFadden
Paratex - Seattle, WA
Pest Control, Seattle, WA.

Thanks, Gene. Great info. as always. It's true slf-employed borrowers need to provide and often explain more. The good news is they can still get loans. Thanks again!

Jan 22, 2014 11:43 AM #7
Debbie Reynolds
Platinum Properties - Clarksville, TN
Your Dedicated Clarksville TN Real Estate Agent

Since I am self-employed I dread having to apply for credit. With a tax return of almost a hundred pages they rake us over the coals.

Jan 22, 2014 11:47 AM #8
Joan Whitebook
BHG The Masiello Group - Nashua, NH
Consumer Focused Real Estate Services

Wow -- It looks like the real estate industry is going to have a tough time!  Isn't that a bit ironic?

Jan 22, 2014 12:09 PM #9
Joe Petrowsky
Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709 - Manchester, CT
Your Mortgage Consultant for Life

Good morning Gene. Many self employed borrowers need to be coached and have discussions with their accounts as to future borrowing needs. In many cases, with a little coaching we can get these borrowers where they need to be.

Great post.

Jan 22, 2014 07:06 PM #10
Joe Pryor
The Virtual Real Estate Team - Oklahoma City, OK
REALTOR® - Oklahoma Investment Properties

Gene, thanks for the update and this reminds me about how hard it is for many REALTORS® to get a home loan if they are not married to a second steady income. So many agents spend their way to volume and filing for a home loan should be a wake up call about profitability.

Jan 22, 2014 09:27 PM #11
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Maria:  I agree.  Lenders and Underwriters cannot deal in the unknown or undocumented ..

Kathleen:  For lack of a better word ... "positioning" is important.  Glad you have followed that trail ...

True enough, John.  But in these times, much of what was ... is no longer.  Documentation .. proof ... is what is demanded.  Unfortunately the applicant can't have it both ways.  The advantage of all the write-offs and minimum paid taxes ... and enough workable income to support a mortgage approval.

John:  All I can add is ... amen.  It IS important to work with experienced professionals, no doubt about it.  I appreciate your kind words ...

Paul:  Yes, loans can be approved ... with the right income ... verifiable income ...

No doubt about it, Debbie.  The Returns are scrutinized closely.  But we've seen when they weren't .. or little documentation was needed.  We know the results of that, unfortunately too ...

Joan:  Yes .. but hopefully we are educated enough about what is demanded to obtain a loan that we are better and fully prepared to meet those demands ...

Great summation of what is needed, Joe ... preparation and planning ...

Joe:  No doubt about it ... having a second stable income helps in these instances.  For those that do not enjoy that though ... with guidance and preparation ... they should still be capable of buying successfully.  Appreciate your comments ...



Jan 23, 2014 09:09 AM #12
Ralph Gorgoglione
Maui Life Homes / Metro Life Homes - Kihei, HI
Hawaii and California Real Estate (310) 497-9407

Gene, yes, it can’t emphasize enough the importance of how detailed tax returns and bank statement activity should be for a a self employed person in order to be approved for a home loan.

Jan 25, 2014 09:01 AM #13
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

Ralph:  Attention to detail is unbelievably important, no doubt about it.  The importance of having a "game plan" and preparation when entering the home buying process can't be overlooked either ...


Jan 25, 2014 11:44 PM #14
John G. Johnston
John G. Johnston & Associates, LLC - Westcliffe, CO
An Exclusive Buyer's Agent ~ Westcliffe, CO

Gene  Damned if you do and damned if you don't.  I've been self-employed all my life.  With the new CFPB regulations does anything change this year?  Thanks for sharing great info.

Jan 26, 2014 09:53 AM #15
Gene Mundt, IL/WI Mortgage Originator - FHA/VA/Conv/Jumbo/Portfolio/Refi
NMLS #216987, IL Lic. 031.0006220, WI Licensed. APMC NMLS #175656 - New Lenox, IL
708.921.6331 - 40+ yrs experience

John:  Unfortunately, I know of nothing changing in this regard as a result of the CFPB regulations.  At least nothing special ...


Jan 27, 2014 09:56 AM #17
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708.921.6331 - 40+ yrs experience
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