For some homebuyers, especially self-employed, proving you can afford a mortgage may be hard if the tax returns do not show enough income.
Now, you can use your bank statements deposits, personal or business, to qualify.
This works for homebuyers that get paid via a 1099 (no taxes taken out) or are self-employed.
Here is what you have to show:
First, you need to have 2 years in your business. This is established through the following:
- Letter from CPA noting 2 years of filed tax returns, or
- Business Registration as LLC or other entity – verified in SUNBIZ, or
- State licensing.
Then, you turn to your bank statements.
Option 1: Use 1 or 2 Year of Bank Statements to Qualify
- 1 year for personal bank statements or
- 1 or 2 years for business bank statements.
How to Calculate: For business bank statement, add up all your deposits, for 12 or 24 months.
Transfers from one bank account to your business account does not count.
Then divide by either 12 or 24.
Example: over a 12 month period, you average $10,000 deposits in your bank account, or $120,000 for 12 months. Divide $120,000 by 12 (months) = $10,000 is your monthly income.
- If it is personal bank statements, your income is $10,000
- If it is business bank statements, you can only use 50% of that, so it is $5,000.
24 months of bank statement gets you a slightly lower rate.
Here are the loan programs:
- Can be primary, secondary or investment property.
- Credit Scores:
- 660 and above, 10% down
- 620 to 659, 15% down
- 580 to 619, 20% down
- 500 to 579, 25% down
- Minimum $150,000
- Some reserve requirements based on your credit (monthly payments in your bank) when you close.
- Non-warrantable Condos and Mobile Homes also.
Option 2: Use 2 Months Banks Statements for 20% down. That’s it.
Actually, you just need 1 month’s bank statement to start, because over the course of the loan, you will submit your second bank statement. That’s it.
Here is the loan program:
- Minimum credit score 680;
- 20% down, plus closing costs and 12 months reserves (money in the bank once you close);
- Can be primary, secondary, or investment property;
- Can use a personal bank account or business account; and,
- Foreign Nationals qualify – no credit score needed.
Here is an example of how it works: you sell something or get a deposit of $50,000, that deposit qualifies you for a $200,000 loan, and cover closing costs and reserves.
Getting a mortgage if you are self-employed is not hard, provided you plan for it and you, in fact, have cash flow or income to cover a mortgage payment.
To find out if you are qualified, call me at 800-991-3268, email me or go to my site and fill out an application.
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