This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at www.ashefordfunding.com  
 

“Mortgages and More”

David Kanis and Beth Burdick

Home mortgage options are increasing for the self-employed

At some point in our lives many of us have had the dream of being self-employed. There are those of us who acted on this dream early in life, starting with that first lemonade stand or paper route and moving on to bigger things. Some of us came to self-employment later in life either as a result of corporate downsizing, or a decision that we were finally ready to become our own boss. Some people think that running a small business and getting a mortgage are like oil and water, the two just don’t mix. We have received a number of questions from self-employed individuals with respect to obtaining financing. Today, we focus on their issues.

Q. I am self-employed and make plenty of money to buy a house. However, my accountant takes every available tax write off for me. On paper that puts my income slightly above the federal poverty level. Can I get a loan?

A. Yes. You can if you are credit worthy. There are several types of loans that require less documentation than a “full doc” loan. One is called a “stated documentation” or “reduced doc” loan. The premise of a stated loan is that you have been self-employed for at least two years and are making a good to great living. However, your accountant is doing an even better job of writing off all your expenses thus leaving you with very little income to report to the IRS. On the loan application you simply “state” your income before expenses. You should have savings (reserves) to back up the income you have stated.

Q. I have been self-employed for several years. All my money is tied up in commercial property and my business inventory. I can get my hands on the money for a down payment. Is there a loan out there for me?

A. Yes. If you are credit worthy you have several options. There are two types of loans that you might want to consider. The first is called a “no ratio” loan. In this type of loan no income need be stated but you must state verifiable assets and prove two years of self-employment. The other type of loan you could consider is called a NINA. In this type of loan, no income or assets need be stated or verified. You must be able to verify two years of self-employment, either through a letter from your accountant (the magician) or your business licenses.

Q. I currently reside in Florida where I own and operate a graphic design business. I plan to move to Asheville and run my business out of my home. I will be able to keep some of my customers but will have to develop business in the local area as well. I have a part-time job lined up to supplement my income if necessary. I will have the down payment from the sale of my home in Florida because. Will I be able to get a mortgage loan for a home in Asheville?

A. Yes. If you are credit worthy and can come up with a 10% down payment. It’s called a “no documentation” loan. On this type of loan you are not required to state income, assets, or employment. Your eligibility for a loan will depend on your credit score and the appraised value of the property you select.

And if all else fails, pull the salaried rabbit (masquerading as your spouse or domestic partner) out of the hat. Sometimes that is the quickest and easiest way to a mortgage. But more about that in next week’s column. So in between practicing your magic tricks send us your questions for future columns. 

David Kanis and Beth Burdick combine twenty years of financial management and lending experience. In addition to operating Ashford Mortgage, they teach mortgage and finance classes at the Carroll-Phillips-Cumbie Real Estate Institute and at local real estate firms. Contact them at 350-8886 or by e-mail at ashford@mortmoney.com.

This article has been written by David Kanis and Beth Burdick
Contact David Kanis online at www.ashefordfunding.com