Self-employed buyer uses alternative to tax return to qualify

Mortgage broker:

Liz Bayer, ProMortgage.

Property type: Condo in San Rafael.

Appraised value: $625,000.

Loan amount: $406,250.

Loan type: 30-year fixed.

Rate: 6.75%.

APR: 7.088%.

Backstory: A past client of mine referred me to a neighbor who wanted to buy the condominium that she was currently renting. She had money from an inheritance that she would use for the down payment.

The challenge was that she was selfemployed and, although she had strong income from her 2022 tax return, she did not have enough years in her business to use only last year’s income.

Generally, in order to use only one year of filed taxes, a self-employed borrower needs five years of self-employment.

My client only had three years of selfemployment, so the traditional lender required two years of tax returns. Unand fortunately, if we went that route, she did not qualify with using the average of 2022 and 2021 returns. I recommended that we go with the non-traditional “bank statement” loan program, which is perfect for this type of situation.

My client simply had to provide the last 12 business bank statements and the “Generally, in order to use only one year of filed taxes, a self-employed borrower needs five years of self-employment. My client only had three years of self-employment, so the traditional lender required two years of tax returns. Unfortunately, if we went that route, she did not qualify with using the average of 2022 and 2021 returns. I recommended that we go with the non-traditional ‘bank statement’ loan program, which is perfect for this type of situation.” qualifying “deposits” became the source provided the detail from her expenses of income rather than the tax return. for the accountant to review.

The second hurdle that we had to Based on the accountant’s review of overcome was the 50% “expense factor” the tax return and her expense detail, he that the lender applied to those deposits determined that a more accurate “expense to determine the qualifying income. factor” for her business would be

If we could provide a letter from the 28% and provided us a letter supporting accountant who had reviewed her tax this. Our lender’s guidelines allowed for a return to get their expert opinion that the licensed accountant to evaluate expenses expense factor should be lower, then my and approved my client using the higher borrower’s qualifying income would increase, income that we needed. This put us into which would be important to great position to meet our 21-day closing! qualify my client for the transaction. In the case of my client, she was very organized