Buying a Home While Self Employed

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Real Estate Agent with RVA Home Team 0225195925
https://activerain.com/droplet/4kWr

Buying a Home While Self Employed

Buying a Home While Self EmployedThis year my husband and I decided to purchase another investment property. If you have been reading my blog, you know we have purchased 8 properties over the last 14 years. In most of those cases the mortgage has gone into my husband's name simply because I was either still in college, didn't have a solid two year work history, or due to the fact I am self employed and it is easier to obtain a loan when you are working for someone other than yourself. Now we are in the process of purchasing another rental property and decided it was time to spread the risk and put it in my name. 

How Do You Buy a Home When Self Employed?

We knew going into this more documentation would be required by a mortgage lender, we just didn't realize how much more would be requested. It has been a frustrating yet educational experience. As a Richmond VA Realtor, I help buyers everyday achieve their goals and I rarely get into the mortgage aspects as that is beyond my scope. Buyers come to me already pre-approved or I put them in contact with one of my preferred lenders to iron out their loan details. 

So what documents will you likely be asked for if you are self employed and want to purchase a home? Here are a few that have been requested of me:

* 2012-2013 W2's and tax returns

* Copy of drivers license

* Bank/financial statements showing the down payment funds and reserves 

* Mortgage statements and copy of the note for primary residence and first investment property, to prove I am not on the loans

* Verification of employment. Since I am self employed with my business in an SCorp classification, my accountant will be the point of contact

That was easy, right? Well, yes, however that is just the beginning. Once the file was handed to a processor this additional documentation was requested:

* 60 day history of investment accounts

* A profit & loss statement for my business showing income and a break down of expenses

* A breakdown of earnings year to date 

* Complete 2 year work history. (I had changed brokerages so I had to provide the name, contact info, and dates employed as an independent contractor for all places I worked)

* Letter of explanation detailing my varying income. (When you work for yourself, your income often varies!)

* Updated transaction history of my business account, including showing the EMD (Earnest Money Deposit) check has cleared

Quite the list!

While this may seem daunting, it really wasn't that difficult. It was just an inconvenience. It is a good thing we have great record keeping and knew exactly where to find these requested documents. And, the other items merely required me to stop at the bank or call my previous brokerage to ask for some information. The KEY is to obtain this information for the lender as quickly as possible so they can get the file back into underwriting and clear you to close!

For additional information on obtaining a loan while self employed, check out this article MSN.

Richmond VA Real Estate Agent

Ready to get your real estate journey underway with a Richmond VA real estate agent who has been in your shoes? Contact Shannon Milligan at the RVA Home Team with Jefferson Properties today!

Originally published at: http://www.rvahometeam.com/richmondvanews/buying-home-while-self-employed/

Posted by

Shannon Milligan, Associate Broker/Realtor

RVA Home Team

Winning with Integrity

eXp Realty 

6802 Paragon Place #410, Richmond, VA, 23230

804-248-8207 (cell)

www.rvahometeam.com

 

 

 

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Re-Blogged 3 times:

Re-Blogged By Re-Blogged At
  1. Anna Hatridge 07/23/2014 12:58 AM
  2. Dawn Zema 07/23/2014 05:01 AM
  3. Winston Heverly 03/18/2015 01:38 PM
Topic:
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Rainmaker
820,770
Juli Vosmik
Dominion Fine Properties - Scottsdale, AZ
Scottsdale/Cave Creek, AZ real estate 480-710-0739

Shannon, well done.  The self employed buyer does have to provide more information than the salaried buyer, but if you keep good records, you'll be ready.  Well done. 

Jul 23, 2014 07:26 AM #33
Rainmaker
3,094,424
Nina Hollander
Coldwell Banker Residential Brokerage - Charlotte, NC
Your Charlotte/Ballantyne/Waxhaw/Fort Mill Realtor

Great post, Shannon. It is more complicated when you are self-employed but if you prepare properly it's just a lot of paperwork (and that's just the nature of the exercise).

Jul 23, 2014 07:55 AM #34
Rainmaker
1,354,727
Jeff Jensen
The Federal Savings Bank/Lending in 50 states - Greenwich, CT

I hope all your properties are fully rented and low on maintenance.

Jul 23, 2014 08:25 AM #35
Rainmaker
1,833,953
Michael J. Perry
KW Elite - Lancaster, PA
Lancaster, PA Relo Specialist

Step # 1 for Self Employed people- ask them where is your Business Checking Account ??? These bankers can pull up the monthly business cash flow moving thru the account and are very willing to create an in house Portfolio loan !!!

Jul 23, 2014 09:52 AM #36
Rainer
108,589
Mike Kozlow
Mike Kozlow Real Estate - Lakewood Ranch, FL
Broker

Shannon, I commend you for the courage to expose the hoops the self employed are required to jump through. I noticed none of the usual loan "officers" jumped in. Maybe this will push them.

God forbid that you have an illness that cause your income to drop as I did with lung cancer. That immediately deems you a high risk.

If you have an IRA and are over 65, you may be required to make withdrawals for three months to prove that you can! That is even if you don't want to make the taxable withdrawals.

My paperwork requirement was twice as long as yours and at the last minute, the day before closing, they wanted my wife off the mortgage. That meant if I were to die, the note would come due.

I paid cash.

Jul 23, 2014 10:30 AM #37
Rainmaker
1,537,730
Marte Cliff
Marte Cliff Copywriting - Priest River, ID
Your real estate writer

It was SO much easier for the self-employed when stated income loans were the norm. 

Jul 23, 2014 01:44 PM #38
Rainmaker
1,060,712
Sharon Parisi
United Real Estate Dallas - Dallas, TX
Dallas Homes

Shannon, your post will be helpful to many. Last week a self employed client purchased her first home. He produced the documents you referenced plus a few more and all was well,

Jul 23, 2014 02:15 PM #39
Rainmaker
536,538
Mark Don McInnes, Sandpoint
Sandpoint, ID
North Idaho Real Estate - 208-255.6227

Always good to put on another pair of shoes to walk that mile in.  Always educational.

Jul 23, 2014 02:36 PM #40
Rainmaker
820,143
Maureen Bray Portland OR Home Stager ~ Room Solutions Staging
Room Solutions Staging, Portland OR - Portland, OR
"Staging that Sells Portland Homes"

This list is an excellent resource for anyone who's self-employed and wants to explore mortgage options.  Thanks for sharing it!

Jul 23, 2014 03:23 PM #41
Rainmaker
1,116,227
Paula McDonald
Beam & Branch Realty - Granbury, TX
Granbury, TX 936-203-0279

It certainly is more difficult but not impossible as you pointed out.  Great post on what is needed. 

Jul 23, 2014 10:07 PM #42
Rainmaker
592,740
Than Maynard
Coldwell Banker Heart of Oklahoma - Purcell, OK
Broker - Licensed to List & Sell - 405-990-8862

Good information.

Buying when self-employed is difficult now. A few years ago with the idiotic 'stated income' loans anyone and everyone was buying. Not today.

Jul 23, 2014 11:27 PM #43
Rainmaker
456,036
Shannon Milligan, Richmond VA Real Estate Agent/Associate Broker
RVA Home Team - Richmond, VA
RVA Home Team - Winning with Integrity.

Jordan - Yes, having access to my documentation and a cooperating bank was KEY. 

Ron - I have been asked for additional documentation, mostly updates of the original items I listed. If I want the house, I need to obtain the docs!

Terry - Thank you for taking the time out of your day to read my post!

Lottie - this is our second investment property but first time we are putting it in my name only and since I am self employed...Next time probably cash, lol!

Kimo - Thank you! Yes, we looked at my DTI and several other items. Having a strong credit score was important.

Dwight - It was interesting as I found the article when I was linking up my post. It WAS good timing!

Debbie - Yes, when we bought the first investment property it was in my husbands name and not nearly as much documentation. 

Tessa - I like to write about my personal experiences. I feel like my clients get a much better picture of who I am, what I am about, and understand I have been in their position.

Karen - I have been working with a great mortgage lender and that has made all the difference!

Jan - Best of luck to you as well! I think many in the real estate industry are pouncing on our investment properties before the rates increase!

Tammie - Wish I would have started 10 years ago! If I can follow in Debbie's footsteps, I am in a good place!

Gene - Exactly what you said - You got through it!

Myrl - Thank you!

Rob - Great point, there are alternatives for investors to explore. 

Juli - Thank you! Have a great weekend!

Nina - Yes, I don't complain as it is the nature of the business.

Jeff - I buy townhomes so the maintenance is not much at all. It is important for people looking into this option to make sure they are cash flow positive after they pay HOA fess. 

Michael - I didn't go through my bank so I had to obtain all the information for my lender BUT by bank was amazing at getting me the information within minutes. 

Mike - I did have to provide retirement fund information but didn't have to pull anything out. We kept my husband off of this loan so shouldn't have any last minute issues with that. Cash is always EASY!

Marte - YES!

Sharon - Yes, I feel fortunate that I haven't had to provide TOO much, then again I gave A LOT upfront before I was even asked for it. I also contacted the lender daily to make sure they didn't need anything else and then they did, I have it immediately.

Mark - Very true. We also moved our personal residence in January. I would say I have been in my clients shoes a lot lately, lol!

Maureen - Thank you very much!

Paula - I appreciate you reading my post!

Than - I have noticed lending in general is still difficult but I guess it depends on how bad you want it!

 

 

 

 

 

 

 

 

Jul 24, 2014 06:49 AM #44
Rainmaker
871,844
Elyse Berman, PA
Best Connections Realty, Inc. - Boca Raton, FL
Boca Raton FL (561) 716-7824 CRS, ABR, GRI,ePR

Shannon,  You've done an excellent job of explaining what many self-employed people find confusing.  You've broken it down into manageable steps for buyers.  Nice job!

Jul 25, 2014 11:35 AM #46
Rainmaker
456,036
Shannon Milligan, Richmond VA Real Estate Agent/Associate Broker
RVA Home Team - Richmond, VA
RVA Home Team - Winning with Integrity.

Elyse - Thank you! Clear to close!

Jul 26, 2014 03:39 AM #47
Rainer
11,482
Mark Peter Lynch
Residential Mortgage Services - Winchester, VA
Think Mortgage, Think Mark!!

Favorite Lender saying-  "Clear to Close", and I am sure it is a Real Estate agents too.  Shannon great job in explaining what is need and what to expect- that only comes from experience- great post!

Jul 27, 2014 07:14 AM #48
Rainmaker
266,262
Dan Derito
Success! Real Estate - Brockton, MA

Your explanation of the documentation process was beautiful Shannon.  It all makes sense, so that the banks aren't funding mortgages to folks who have no ability to repay, as happened prior to the crash.  Providing your financials aren't that difficult, as you say, but it does require some diligence. I wish that this had been explained to me in 1979 when I bought a three family home, and  was self employed.

Jul 27, 2014 08:48 PM #49
Rainmaker
1,047,546
Christopher Lotte
Red 1 Realty - Lithopolis, OH
Central Ohio Realtor, 614-390-9243

Shannon, thanks for the post!.. I have several clients that are self employed and this explaination will help out tremendously!

Jul 27, 2014 11:39 PM #50
Rainmaker
456,036
Shannon Milligan, Richmond VA Real Estate Agent/Associate Broker
RVA Home Team - Richmond, VA
RVA Home Team - Winning with Integrity.

Mark - Yes, I LOVE the words "Clear to Close" especially when they come a week ahead of time! Yep, less than a 30 day close, am self employed, and my lender got it done a week ahead of time!

Dan - Thank you! It certainly was a learning experience as we never used my income on our other mortgages before.

Christopher -  I think the biggest thing is to prepare our self employed clients for what lies ahead!

Jul 27, 2014 11:50 PM #51
Rainer
90,907
Whitney Watson
First Heritage Mortgage - Henrico, VA

This is a great post for self-employed borrowers trying to obtain financing to read ahead of time.  You've clearly explained the kinds of documents they will need to provide the lender.

Jul 30, 2014 12:48 PM #52
Ambassador
4,215,209
Bob Crane
Woodland Management Service / Woodland Real Estate, Keller Williams Fox Cities - Stevens Point, WI
Forestland Experts! 715-204-9671

Great post Shannon, a lot of good buyers fit into this category and this info will be useful for them.

Mar 18, 2015 04:21 PM #53
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RVA Home Team - Winning with Integrity.
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