Mike Pacheco of Qualified Home Loans Announced New Home Loan Opportunity For Self-Employed
Laguna Hills, Calif .– (Newsfile Corp. – September 30, 2021) – In a new advancement, Mike Pacheco of Qualified Home Loans said their new opportunity will help self-employed people looking to gain approval from a mortgage. 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 people have money on a regular basis, because it is a good sign that people are able to repay the money they 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 it comes to self-employed mortgages. Mike Pacheco of Qualified Home Loans, an independent mortgage company specializing in helping self-employed people get real estate financing, explains why.
To view an improved version of this graphic, please visit:
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.
Despite having plenty of cash, not to mention access to credit through their business accounts, self-employed people are often shocked when they learn how much their net income is after factoring in tax deductions. and other business expenses. For example, a self-employed electrician may have gross sales of $ 200,000, but if they write off $ 190,000, they are left with $ 10,000 in taxable income. Their gross income is very different from their net income.
Fannie Mae and Freddie Mac, along with the FHA and VA all base their lending decisions on the net income shown on tax returns. There are unconventional loan programs that qualify without a tax return (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.
Full doc (tax declarations) – 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.
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 instead of 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. at 3.25-3.45%. This same customer with 10% decrease should be between 5.0 and 5.25%. These loans generally have costs to obtain.
True No documentation – Some lenders, called community development lenders, have a unique waiver that allows them to give a true doc-free loan even for owner-occupied loans, and no income is measured at 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.
Independent borrowers: recent challenges
The COVID-19 pandemic has had devastating effects on the global economy in 2020. The world has experienced record unemployment rates and unprecedented losses in business income, making 2020 a bad year for many business owners. ‘business. As a result, many potential buyers of independent homes have had to postpone their big purchase until their incomes stabilize. Additionally, the best loans are not available because taxes filed in 2020 do not support enough income for many business owners. Even though 2019 has been good and businesses are on track in 2021, their âqualifying incomeâ is probably entirely based on their 2020 tax returns!
âBusinesses seem to be stronger and healthier now. However, no good credit, no solid assets, or no equity can overcome the lack of income on 2020 taxes. For example, you have perfect credit and $ 1.0 million in the bank, but your 2020 taxes show badly. . While there are still loans for you, you can’t just go for a refi and drop your rate from 4.0% to the 2.75% prime rate you see everywhere. We can’t even consider when a business was forced to close It defies common sense, but lending is about rules, not logic, âPacheco shares.
Independent borrowers: the opportunity
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. Individuals can withdraw money from their home for improvements and even lower their rates at the same time. Their 2021 tax returns could be the key to unlocking incredible loan opportunities that are currently not available to them.
Pacheco comments on this opportunity: âIf you are self-employed, you are back in the driver’s seat. Planning ahead is essential to use your 2021 taxes to qualify for the loan you want. Not all loans and situations allow individuals to use 2021 taxes. Starting to put their information and solutions together now is especially critical for those looking to buy. While it is true that being an independent borrower means more work for them from the start, Qualified Home Loans is fully equipped to help individuals succeed.
Qualified Home Loans is constantly working with independent homebuyers to help them qualify for a working mortgage. For more information, contact Mike and the team by visiting qualifiedhomeloans.com.
Contact Person: Mike Pacheco
Company Name: Qualifying real estate loans
E-mail: [email protected]
Phone number: 949-528-3967
To view the source version of this press release, please visit https://www.newsfilecorp.com/release/98148