Qualifying for a Mortgage as a Small Business Owner
Having trouble qualifying for a mortgage?
Many small business owners have had trouble qualifying for a mortgage ever since the “Stated Income” loan was discontinued by major banks. Ten years ago, you could simply state that you made $10,000 per month and it was taken as truth by the bank, no questions asked. But making that much and being able to show that much on a tax return could be two very different things. Even by following the letter of the tax law, you could legally declare a given set of income and expenses in radically different ways – some ways being good for a loan application and some were pure poison.
Plan for qualifying.
One way to plan for qualifying is to work with your tax advisor in conjunction with a loan officer and decide on how to declare your business in a way that leads you to your goals. Financial Solutions/Preferred Partners has loan officers who are active tax preparers as well and can best ensure that your goal is met. Your allowable tax reporting choices can be selected to balance out your needs for current tax savings and your desire to qualify for a mortgage.
Even by following the letter of the tax law, you could legally declare a given set of income and expenses in radically different ways – some ways being good for a loan application and some were pure poison.
Another way that has gained popularity of late is to submit 12 or 24 months of bank statements showing sufficient cash flow to afford the mortgage you seek. There can be some nitpicky rules to qualify by, so it is a good idea to find a lender as early as possible to make sure you are not using your business account in a way that does not qualify you for their programs.
If you are a first-time buyer and can see yourself in the role of a landlord, you can begin your career in real estate by purchasing a multi-unit property. You can use the rent from the units you do not occupy as income which can tremendously boost your declared business income and allow you to qualify for a substantial investment. In the future, this same investment can help you qualify for a single family home if it provides positive cash flow.
So if you have not been able to purchase or refinance due to reportable income problems with your business, there are ways that you can move forward and expand your financial possibilities.
Here to help
Financial Solutions of California
Our goal is to provide families with the kind of integrated financial guidance that makes sense of the many financial issues impacting their lives.