Information for the Self-employed or Commissioned Borrower

By
Mortgage and Lending with Benchmark Mortgage nmls 2143 NMLS # 198479

Today was a sad day for a purchaser, realtor and myself.  I had to decline a great loan because of the adjusted gross income.  A few months ago investors would have been happy to loan money with these credit scores and years of self-employment.  Today, that just doesn't happen.  Here are the details for S/E or Commissioned buyers documentation requirements.

Last 2 years tax returns all schedules, income is figured by averaging the last 2 years adjusted gross income.

If you have rental income you must show it on your taxes to prove you are receiving. (You can do an amended return for 2007 if you need to make a change in anything)

We cannot use your companies bank statements as proof of funds or sourced and seasoned money.  If you have an account in your name and d/b/a added, we can't use it.  You need a personal account which can be used and a business account which cannot be used. (self-employed)  Do you have any questions?

Comments (8)

Michael Wayne Jackson
Coldwell Banker - Novato, CA
Broker - Seniors Real Estate Specialist Novato

It's unfortunate that the lenders can't go off of the whole picture especially if the commissioned borrower has the assetts to back up what they are doing.

Nov 13, 2008 05:59 AM
Jane Wallace
HomeSmart Cherry Creek - Denver, CO
CRS | SRES, Denver Real Estate

Wow, I had a similar situation thanks to the bank where my buyer was fully qualified and then the rules changed.

Nov 13, 2008 06:18 AM
Ann Allen Hoover
RE/MAX Advantage South - Hoover, AL
CDPE SRES ASP e-PRO Realtor - Homes for Sale - AL

That is a bummer!  It's good to know what the requirements are though.

Nov 13, 2008 06:53 AM
Chris Montz
Network Funding, LP - Birmingham, AL

Its sad that this credit market has tightened so much that even though the great borrowers cant get a lown...... yet the ones that are still borderline can get loans..... This loan needed a stated income loan because those loans were for the self employed borrowers who cant show there income....

Nov 13, 2008 12:02 PM
J.D. Terry
East Carolina Bank Mortgage - Wilmington, NC
IHaveMoney2Lend

That is the way of the world now.  I guess we either pay now or pay later.  The time of having our cake and eating too are over.  All in all it is a good guideline.  We just need to get out in front of the borrower's to inform them.

JD Terry

Nov 13, 2008 12:03 PM
Cherimie Crane
Cherimie Crane & Associates - Beaufort, SC

WOW,

Thank you. I did not know about not being able to use a business account that is also a personal account. Thank you so much for this information.

Cherimie

Nov 13, 2008 11:28 PM
Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

Generally, the IRS has never liked business accounts that are also used as personal accounts. It's about time the banks got in the same line. Those using business accounts as personal accounts need to set up a personal account and actually pay themselves a salary.

Nov 15, 2008 05:28 PM
Mary Douglas
United Country Ponderosa Realty, Red Feather Lakes, Colorado - Red Feather Lakes, CO
REALTOR, Red Feather Lakes, Colorado

Thanks for the information - I had no idea! Since everyone who is self-employed tries to look really poor for the IRS, it's hard to look a lot richer for the lenders :-( ....I see why JD says we can't have our cake and eat it too!

Dec 11, 2008 03:19 AM