Written by: Glenn A. La Mattina, First Alliance Home Mortgage.
Being an active realtor myself a long time ago, I am certain you have run into this issue. In the days before Dodd-Frank when a "Self Employed" buyer walked into the office we all knew that we could do if that buyer was the A typical "Self Employed" buyer. He made a lot of money buy wrote everything off on his tax returns. Back then the buyer had to put down a 20 to 25% down payment and he applied for a NO Income Verified mortgage. As long as he met a certain credit score he was approved, the deal closed and commissions were earned.
In today's "Post Dodd Frank" world, a realtor working with the same type of buyer would either have him find a co-signer, try to arrange seller financing or the deal would be dead, unit now.....
As the mortgage market loosens up, the secondary markets are offering some more aggressive financing programs. The perfect solution for this type of buyer would be a 12 or 24 Month Bank Statement program.
With this type of program there are no tax returns required (1040s) or 4506 verification done. The buyer needs to be "Self Employed" for a minimum of 24 months/2 years and have a 700 middle credit score. When the mortgage application is taken the buyer must supply 12 or 24 months of business bank statements. The income is calculated by adding up the deposits and dividing by the # of months. Then a third of that number is used as the income factor for qualification.
This type of program can be used on a primary or secondary purchase of a 1 to 4 unit property along with condos. The rates on this product are a little higher than your conventional mortgage rates, but it gets the "Self Employed" buyer into their home, where before they wouldn't be able to qualify.