Hi Greg,

Hi Greg,

I need some help!  I have been self-employed for the past 6 years.  I am looking to refinance my mortgage.  I have heard that it can be very difficult for business owners to refinance.  I am in a local business owner group that meets for breakfast once a month.  Many of the members of that club have told me that it is not easy to get a mortgage when self-employed.  A few have even told of some nightmare stories that didn’t end well.

I am particularly concerned because I am looking to take cash out and borrow additional money.  My understanding is that the mortgage process can be more challenging when taking cash out.  My goal for the cash-out is primarily for home improvement.  Similar to many people in this current market, we had considered selling.  Although it had been a great time to sell a home, we had trouble finding a new home.

The lack of supply on the market is real!  We have no interest in moving into a fixer-upper.  There are a number of those on the market.  If we are going to move, we would only do so if the home is move-in ready.  The few homes that met our expectations in that area either only stayed on the market for a few days or were going well over the offer.  Early in 2021, we held out hope that we would find the right property.  By mid-2021, we decided to give up on the new home search.

Once we decided that the plan was no longer to buy a new home, we put our focus on the renovation.  We have been in our current home for 11+ years.  The home is fantastic, but with a few key preferred amenities missing.  With the run-up in property values over the past 18 months, we have decided to take advantage of our equity position and make the home perfect.

I ran some numbers and estimate that we will need about $80,000 to complete the job to our liking.  While we are at it, the plan is to take an additional $20,000 to clear out some credit card debt.  Based on our current mortgage balance and estimated property value, even with the $100,000 cash-out, we will still have over 30% equity in the property.

As a self-employed borrower, I feel as though I have sufficient income for the mortgage.  I am not sure how everything will look on my tax returns.  I have heard that underwriting can be very, very tough on tax returns.  Also, I have a 740+ credit score.

Any advice you can provide would be much appreciated.

Self-Employed Mortgage Seeker

Hi Self-Employed Mortgage Seeker,

Thanks for reaching out to me for help and advice!  The great news is that as a self-employed client with a nice equity position and great credit, you can qualify for a mortgage.  Not only can you qualify for a mortgage, but taking cash-out can happen as well.  As a self-employed borrower, there are multiple options to consider.  You may be able to qualify for a standard income verification loan.  The standard loan will calculate your usable income based on personal and business returns, among other income documentation.

In addition to the standard income verification loan, there are some great options available for self-employed clients who prefer not to document income.  As a self-employed borrower with more than 2 years of business ownership, you can take advantage of the Bank Statement Program, the Investor Cash Flow Program, or the Asset Qualifier Program.  With your great credit score, you can take cash out up to 80% of the current appraised value.  Some programs may restrict cash-out to 75%.

It is best to complete a full review of your current financial situation and then we can best determine which of these great options will work best for you.