Mike Pacheco of Qualified Home Loans Announced New Home Loan Opportunity For Self-Employed, Business News
In a new advancement, Mike Pacheco of Qualified Home Loans said their new opportunity will help people who are self-employed and looking to get approved for a home loan.
It’s no secret that one of the most critical factors in qualifying for a mortgage is justifiable income. Lenders large and small rightly want to know that you have regular cash, as this is a good sign that you are able to repay the money you have borrowed. Traditional homebuyers are able to prove this by providing a W2 from their employer showing how much money they are making week to week or month to month. However, things get a bit tricky when we start talking about mortgages for the self-employed. Mike Pacheco of Qualified Home Loans, an independent mortgage company specializing in helping self-employed people get real estate financing, explains why.
Unlike a traditional home buyer, independent home buyers cannot simply produce a W2 to prove their income. Instead, independent applicants must have proof of their income using tax returns for the past two years. It can be tedious to provide this information and other supporting documents, but it is necessary when applying for a mortgage. However, the real challenge comes when it’s time to close the gap between what an independent borrower thinks they are earning in income and what their tax returns say.
The most common problem faced by self-employed people when applying for a home mortgage loan is differentiating between how much they think they’ll earn before write-offs and how much the lender decides they actually earn in net qualifying income. , according to their tax returns.
There are unconventional loan programs that qualify without tax filing (such as those that use bank statement deposits). However, these loans all come with higher interest rates, higher costs, and higher down payment requirements.
Pacheco shares the three categories of loans available to the self-employed. These depend on the qualifying method and how the income is documented.
1. Full Doc (Tax Returns) – These are the best loans with the lowest down payment, the best interest rates and are often backed by the government (Fannie Mae, Freddie Mac, FHA, VA). In 2008, in response to the mortgage crisis, the government created a requirement that lenders document that customers have some “repayment capacity”. For a self-employed person or a small business owner, income tax returns are required. No magic program offers these premium loans to independent clients who cannot document their income on taxes. These rates are generally 2.625% to 3.375% for 30-year fixed loans depending on occupancy, purpose, type of property, loan-to-value ratio, etc.
2. Alternative documentation – Alternative documentation uses a different method of qualification instead of tax returns. Here are some examples: using bank statements / business deposits to calculate income rather than taxes; qualify a rental property exclusively on its anticipated rent; company P&L are used as revenue documentation; and others like depletion of assets. The options here become somewhat endless, but the terms are always less desirable compared to full document loans. These programs range from as low as 3.25% to 5.875%, depending on how qualified it is, credit score, LTV, etc. For example, a purchase with 40% down payment using 12 month bank statements and 3.25-3.45% good credit. This same customer with 10% decrease should be between 5.0 and 5.25%. These loans generally have costs to obtain.
3. True No Documentation – Some lenders, called community development lenders, have a unique waiver that allows them to give a true no doc loan, even for owner-occupied loans, and no income is measured from it. all. These loans can provide premium, non-traditional mortgage financing to low-income households, small business owners, immigrants, and other miscellaneous borrowers. Tax returns aren’t used to tell the whole story and, instead, lenders base their underwriting decisions on the borrower’s personality, credit, equity, and general condition. These loans require a 25% down payment or a withdrawal up to 65% of the value. The rates are between 5.5% and 5.625%, and the loans usually have costs.
Business owners, really anyone, would prefer a full doc loan, however, Pacheco saw an issue working with freelance clients last year.
The COVID-19 pandemic has had devastating effects on the global economy in 2020. We have experienced record unemployment rates and unprecedented losses in business income, making 2020 a bad year for many business owners. business. The best loans are not available because taxes filed in 2020 do not support enough income for many business owners. Even if 2019 has been good and your business is on track in 2021, your “qualifying income” is probably entirely based on your 2020 tax returns!
“Businesses seem to be stronger and healthier now. However, no amount of good credit, solid assets, or equity can make up for the lack of tax revenue in 2020. Nor can we even consider when a business was forced to shut down in 2020. qualifications. It defies common sense, but loans are a matter of rules, not of logic, ”Pacheco shares.
The taxes filed in 2021 represent a unique opportunity: a clean slate.
Many programs allow applicants to ignore 2020 tax returns entirely and only use their 2021 taxes. Even the 2020 carry-forward losses would be ignored. The 2020 taxes are not even provided to the lender.
It works for conventional and jumbo loans, owner-occupied, second homes, investment properties, purchases, refinances, and cash loans. This puts 30-year fixed loans at less than 3.0% within reach. Purchases can be made with as little as 5.0% deposit. You may be able to withdraw money from your home for improvements and even lower your rate at the same time. Your 2021 tax returns could be the key to unlocking incredible loan opportunities that are not currently available to you.
Pacheco comments on this opportunity: “If you are self-employed, you are back in the driver’s seat. Planning ahead to use your 2021 taxes to qualify for the loan you want is essential. Not all loans and situations allow us to use 2021 taxes.
Qualified Home Loans is constantly working with independent homebuyers to help them qualify for a working mortgage. Contact them today, so they can review your 2020 taxes with you and help you plan.
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