I’m a self-employed, run a small business, was recently turned down for getting a mortgage because they don’t show income. Are there any programs for people like me?

Because one of the big benefits of working for yourself again to write off expenses you incur in the operation of your business. Because of this, this counts against income or rather the income is reduced to offset the liability. In order to qualify for a mortgage there have to be enough income to offset the monthly liability including principal and interest, fire insurance and multiparty taxes all lumped together.

How lenders are going to qualify you

  • last two years of federal income tax returns
  • schedule C. net profit and loss page
  • add back expenses to net profit or net loss and then divide by 24 months

This is how it’s done with every mortgage lender across the board it’s the standard set by Fannie Mae and Freddie Mac for qualifying someone who is self-employed. What to do: show income, show a net profit, show positive figures for depreciation, depletion and meals and expenses. If you decide to take business use of the home this income can also be added back for qualifying. Showing no numbers in these fields or worse negative numbers for these fields translates to less income used to offset the liability. Qualifying for a mortgage despite being self-employed is not necessarily a problem unless the mortgage payment you’re looking to take on exceeds the amount of income that takes used to offset it on a monthly basis.

If you’d like to learn more about how to qualify being self-employed, you can always contact Scott@sonomacountymortgages.com or give us a call and we can go over the scenario with you directly to see how the numbers play out.

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