by: Carrie Reeder
Being self employed has many benefits.
When you are self-employed, you can write off all of your deductions on your taxes.
You have the potential to make more income than someone who is employed by someone else.
You have the freedom to be your own boss.
One of the few times when being self employed has some drawbacks is when you go to get financing for a home or a major purchase.
But, here are some things to know that can help you make the mortgage loan process run smoothly when you are self employed.
When verifying income - In general, lenders want to see at least 2 years of self employment history, sometimes they want to see 3 years.
They will want to see this history verified in tax returns, usually.
Sometimes the lenders will figure your income as being the average income you claimed on your income taxes as profit, not your gross business income.
Sometimes the lender will figure your income as the lowest of the two years and sometimes as the highest of the two years.
Talk to your mortgage broker or lender and find out which way they verify.
Sometimes lenders will figure a portion of your write-offs or deductions back into your income.
There are ideas of other ways that a lender may be able to verify your income and if you are self employed it will help you to be able to show a more of your income.
A. Use bank statements as proof of income ? Find a lender who will accept 1-2 years of bank statements as proof of income.
It is becoming more common nowadays for lenders to verify your income this way.
This way usually works better in proving income than going off of your tax returns, because you can usually prove a lot more cash flow than tax returns will show.
On your tax returns you usually subtract each and every business expense before you claim any profit.
When using bank statements, you are still proving income, this does not put as much emphasis on your credit score or down payment as the stated income or no doc loan will.
B. Do a stated income or no doc loan ? These types of loans are done all of the time, where you need no proof of income, you only state on a form what your income is, and you do not need to verify it.
This can help if you are self employed and want to state your income as it is and not worry about having the lender average out your income from the last two years instead.
Make sure you are accurate in stating your income, because the lender may be able to obtain past taxes from the IRS to confirm it.
When you do a stated income loan, this will put more emphasis on your down payment or credit score.
So, you will usually need one of these factors to be strong if you want to go this route.
Most of the time when you do a stated income or no doc loan, you will be charged a slightly higher interest rate because of the extra risk the lenders carries.
C. Put together a profit & loss statement stating accurately stating your profits and expenses from the last two years.
This can be a time consuming project, but it can sometimes be used as income verification for a lender.
It is more usable if you have had it signed or verified by your accountant.
There are many ways that lenders can work with you if you are self employed.
There are many programs available to help you and if you have a down payment or decent credit, you are almost guaranteed to be able to get approved somewhere.
To see our list of recommended lenders that would be able to help you, visit here: http://www.abcloanguide.com/mortgageloans.shtml or if you have credit problems, here: http://www.abcloanguide.com/lessthanperfectcredit.shtml
About The Author
Written by Carrie Reeder, Owner of http://www.abcloanguide.com. Carrie's website is an informational mortgage loan website. Her website has articles and a list of recommended mortgage lenders for many different types of mortgage loans.
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Filing An Income Tax Return
Filing An Income Tax Return
by: Gray Rollins
When the month of April rolls around most of America is preparing their income tax returns. Each year all individuals who made an income are required to report that income to federal and state governments by filing an income tax return.
Taxpayers must file two separate income tax returns. One income tax return goes to the federal government and the other goes to the state government that a particular taxpayer resides in. The majority of taxpaying Americans are able to fill out a Form 1040A: U.S. Individual Income Tax Return. Individuals that do not have any children or other qualifying dependents are able to file a federal 1040EZ form. This form is also referred to as the Income Tax Return for Single and Joint Filers With No Dependents. The 1040EZ is basically a shorter version of the 1040A form; however, taxpayers must meet certain requirements before filing a 1040EZ form.
The majority of...
Filing An Income Tax Return
Tax help > Filing An Income Tax Return
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Real Estate Investor Question: Rehab and Sell, or Rehab and Keep?
Tax help > Real Estate Investor Question: Rehab and Sell, or Rehab and Keep?
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Despite your best efforts to manage the flow of your personal information or to keep it to yourself, skilled identity thieves may use a variety of methods to gain access to your...
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Since this is a new product, some people have misconceptions of what a reverse mortgage is.
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No.
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Tax help > What is a Reverse Mortgage?
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When the month of April rolls around most of America is preparing their income tax returns. Each year all individuals who made an income are required to report that income to federal and state governments by filing an income tax return.
Taxpayers must file two separate income tax returns. One income tax return goes to the federal government and the other goes to the state government that a particular taxpayer resides in. The majority of taxpaying Americans are able to fill out a Form 1040A: U.S. Individual Income Tax Return. Individuals that do not have any children or other qualifying dependents are able to file a federal 1040EZ form. This form is also referred to as the Income Tax Return for Single and Joint Filers With No Dependents. The 1040EZ is basically a shorter version of the 1040A form; however, taxpayers must meet certain requirements before filing a 1040EZ form.
The majority of...
Filing An Income Tax Return
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