One of the challenges of getting mortgage loan financing these days is showing total and complete monthly income. Contrary to popular belief you must be able to support ability-to-repay (ATR) as a Consumer Financial Protection Bureau has laws in place to make sure abusive lending practices from days past don’t repeat themselves. One of the things associated with preventing predatory lending is specifically showing ability-to-repay which means fully being able to document your cash, credit, and income necessary in conjunction with purchasing or refinancing a home. Watch for these risky income moves when planning to get a mortgage…
One such factor here we’re going to focus on primarily is income in particular if you have a choppy history or if you’ve changed and income status your ability to get a mortgage may be impacted. Following are some things to avoid when it comes to applying for a mortgage if you want to be successful in having that mortgage loan close escrow
If you’re self-employed you need to show income. Just because the IRS allows you to write off all your income does not necessarily mean you should. It’s a catch-22 who wants to pay more in taxes? Nobody does, but at the same time everyone wants to be able to qualify to get a mortgage and those are two goals at the opposite ends of the spectrum.
If you’re self-employed you must not only show the income, but you also must have solvency in your business as well. You can’t be bleeding your company dry from a fiscal standpoint and taking that money and caring it over to income as every self-employed mortgage application requires tax returns. Most mortgage companies want two years of federal income tax returns to provide supporting income documentation for qualifying.
So if your business is still in its infancy and it’s showing losses? More than likely, the loan is not going to work you will need a co-signer or you’ll have to put down substantially more cash or pay off potentially large sums of consumer debt if applicable in order to qualify.
Mortgage tip: If you were self-employed and now you’re a W-2 employee your home free (in most cases).
If you are self-employed and any of the above affects you it’s just the way it is the only other alternative would be coming at the expense of time to show a bigger income year or get a cosigner. These are some of the things self-employed people typically might go through when seeking a mortgage and or have been turned down and they blame the mortgage company. The mortgage company is only following guidelines the federal government has put into place to prevent abusive and predatory lending practices. You need to play by the rules and guidelines lenders have in place in support of purchasing or refinancing a home.
If you’re looking to get a mortgage or like to get qualified start today with a complimentary quote.