Applying for mortgage, wondering about qualifications based on my information.?

Question

My husband and I are moving back from Texas to Virginia and are seeking a mortgage to purchase a home of listed price 639,000.00. We plan to offer 620,000.00. Assuming our offer is accepted, we would plan to put down 124,000.00 (20%). We would like to mortgage 500,000.00. My husband’s company has made 20-30k for 2006 and 2007. Thus far for 2008, we have made a verifiable income of approximately 996,000.00 per year, since about March-April. I have been told we have moderate – good credit (says the cell phone lady – but I’m not even sure the credit matters as much as the income). And We have a single loan out for a vehicle for approximately 25,000.00.

My question is: How easy would it be for us to mortgage 500,000.00 being self-employed, if we can verify our income by bank statement for this year only? Will the mortgage people work with us, and can we get a rate (6% or so) which is good still, like everyone else who makes this money?

We would like to purchase our first home badly, as we have been renting for years…hopefully I’ll still be excited after this!

Thank you in advance!

Answer 1

If you were my client, I would advise you to offer less on the first offer. This is a buyer market and some homes are going for a lot less and they will continue to go down in value in the next few years.  Don't be afraid to offer less. You can always go up.

For homes these days, everyone should get themselves approved for financing before offering to buy a home. A down payment of 20% is good, but you also need to have a good credit score. Stated income is harder to qualify for and you will have to search to find the right program. Also note that the lower the credit score, the more likely, you will pay discount points on the financing. A one per cent discount point is 1% of the amount being financed, which is collected at closing. Each lender will have their own guidelines.

Being self employed will be more difficult than being employed. They usually look at two years of self employment history and then average the income. Again, each bank is different. Bank statements will have to go with a CPA report on your profit and loss statement, but your income from earlier years may cut off the dream for home ownership this year. Give it a try and learn. Don't offer for the home, until you are approved for financing. This could save you a lot of time and frustration.

I assume that your husband's company is running its income thru a bank. This bank may be the best chance to a good price break on a mortgage. They see the income and know the business. I would start applying there first.

I hope that this helps.

Good Luck!  

Answer 2

The type of loans that most self-employed people have (non-verifiable income to the banks) is a low documentation/no document loan.  When I got my loan, it was a low doc loan and we had to down 30% with a credit score of over 750.  

It all depends on the bank and what they are currently charging.  It is useless for us to tell you what they might charge because until you go in and have your credit checked, the house appraised and your background checked, it would all be a guess.

Question:  If you make that much, why not just pay it all off?

Cell phone places are a pretty poor place to check your credit; you should do it yourself on one of the free credit check sites.  They said I had poor credit and I think I have a fairly decent score.

Answer 3

The other answerer has it correct.  I want to verify though, when you say "a verifiable income of approximately 996,000.00 per year, since about March-April" do you really mean income or do you mean gross receipts?

If you have made $996,000 in INCOME since March/April and you have $124,000 saved that means you spent $872,000 in the last 4-5 months?  Without purchasing a home I can't imagine spending that much in such a short time unless the money was spent to run the business.

Do you by chance mean you have $996,000 in gross receipts?  That means you did $996,000 worth of business.  A quick a dirty way to figure out your income would be to take the gross receipts, $996,000 and subtract the operating expenses for the business.  this will give you the income you actually have.

As I said, the other answerer has it correct.  No one here will be able to give you a good estimate of costs for the type of loan you are looking for.  Typically this has been the type of loan being cracked down on recently as many have abused it.

Good Luck!