I have been self employed for the last 12 years. Credit rating is good. I have the same dilema that most small business owners have…our personal income does not look too impressive…can I use my gross profit from my business in a stated doc loan? ???
If you are going stated doc then you “state” your income. If your gross profit is good enough (and your taxes show it) you could go full doc.
You could also go no ratio or no doc. Your rate will be a tad higher but you should be able to avoid any income issues with those programs.
I know what no doc means but what is no ratio?
no ratio is where you do not declare what your income is, only how it is derived. so you would put on the 1003 that you are self-employed and declare what type of business it is. you would then only have to provide proof of two years self-employment and you should be good to go. please keep in mind that underwriters will be reviewing all of your credit history and debt situation and then make a decision based on reasonableness. for example… say you are a self-employed popcorn vendor at flea markets and local festivals with low debt and good credit. if you were to try and buy a 500K home the underwriter is going to look at the whole scenario and decide whether it is reasonable that a popcorn vender will be able to afford a 500K home. No offense to any popcorn vendors out there.
Silva - Stated income verified assets. Some lenders do 12 months bank statements as full documentaion.Once you go full doc you can not go stated with that lender.Most baks look at what you do for a living is in the ball park at salary.com
;DHope this help.
In order from the most documentation/ best rates to least documentation/ worst rates:
Full Doc= full documentation of income and assets and verification of the existance of your business for at least 2 years. It sounds like this won’t work for you because the lender will look at the bottom line of your tax returns after all of your write offs, excluding a few things such as depreciation expense.
Stated income/ verified assets= no documentation of income, but lender will verify a 2 year history of the business through a letter from your CPA stating that you have been filing taxes as self-employed for at least 2 years, or they will accept a business license. You will have to document where your down payment and closing costs are coming from.
Stated income/ stated assets= Same as above, but no documentation of assets required
No Ratio= No disclosure of income, lender still verifies 2 year history of your business. no documentation of assets, but they are stated on the loan application
No doc (no income/ no assets)= essentially a blank loan application. Lender does not verify assets, income, or history of business. Usually this is done for a borrower who has not been in business for at least 2 years or cannot document it.
The less documentation you provide, the higher the rate you will pay on the mortgage
You can do an option arm with payments as low as $300 a month per $100k
What is the property value and how much do you owe ?
Anthony Lanzone
Senior Mortgage Advisor