California mortgage answers · Self-employed

Self-employed income and the mortgage: how it is read, and the routes when it is not enough

A self-employed borrower is usually qualified on the net income shown on two years of tax returns, after the write-offs. That is the number a bank reads, and legitimate business deductions can make it look far smaller than the business actually is. The result is a strong business owner being told no, or being told a number that does not match what they know about their own money.

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What this topic is really about

There is more than one way to read that income. Conventional underwriting comes first, with add-backs for depreciation and certain one-time expenses. When that route does not reflect the business, bank statement programs qualify on twelve to twenty-four months of deposits, and other programs use a profit and loss statement. These carry their own pricing and reserve requirements, and they are not capped by the conforming loan limit.

The answers here are the questions self-employed buyers ask in public, answered against how the income is actually calculated, with the part that changes on a specific file.

On your file

What changes this answer on your file

Two years of returns against one, and whether the income is level, rising or falling.
The write-offs that can be added back and the ones that cannot.
Business deposits against personal deposits, and how many months of statements are used.
Reserves after closing, which the alternative routes weigh more heavily.
The loan amount, since the alternative routes price differently as it rises.

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Who answers

Nick Nagy

23 years in California lending · NMLS 314880 · CA DRE 01444600 · Loan Factory, Inc.

Dual licensed, so the loan side and the real estate side of a move are looked at as one problem instead of two. Most of what goes wrong in a move is a timing problem wearing a financing costume, and it is cheaper to catch it before you write an offer than after.

Financing is placed through Loan Factory, Inc. Real estate work is under CA DRE 01444600. More about Nick.

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The desk behind the file

One file, 237 lenders competing for it, and a broker who has done this for 23 years.

Loan Factory, Inc. is the brokerage. These are its published figures.

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A retail bank has one guideline book. When your file does not fit it, the answer is no and the reason is rarely explained. A broker shops the same file across the shelf and finds the lender whose box it already fits.

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Straight answers

Questions people here actually ask

The three most asked, in one sentence each. The full answers are on their own pages above.

Pause Retirement to pay off our current mortgage

A self-employed household’s tax-return income and actual cash flow are rarely the same number, because write-offs that help at tax time hurt at qualification time. The full answer, with the local number and its source, is on its own page: https://go.homeaccesslist.com/answers/temecula/self-employed-bank-statement-loan

People who own $1-2 Million dollar homes. What do you do...

A self-employed borrower’s real income and the number a standard file shows can be two different things. The full answer, with the local number and its source, is on its own page: https://go.homeaccesslist.com/answers/sgv/8-reasons-self-employed-borrowers-get-the-wrong-answer

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Ask Nick about your exact situation

Tell me what's going on. I'll tell you what the numbers and the guidelines actually support, on your own file.

What happens after you send it

You tell us the situation. Which end of the market you are in and what you are trying to do. It takes about a minute, and there is no credit pull to start.
We shop the file. One file goes across 237 lenders at Loan Factory, against the programs that actually apply at your price point rather than the one book a single bank keeps.
You get a real number. Written down, with what it rests on, so you can check it yourself. You keep it either way, and when the honest answer is that waiting is the better move, that is the answer you get.