Tax returns…. we don’t need no tax returns!
Since the real estate/mortgage melt down of 2007 – 2009 self employed borrowers and real estate investors have been overly burdened with onerous documentation requirements. Many self employed borrowers sat on the sidelines.
Slowly the corner started to turn for required underwriting documents for self-employed clients starting in 2019…. Then came Covid. Once the lock down hit in spring/summer of 2020 lenders wanted to be extra cautious and consevative to cover the bases and minimize future loses.
Although documentation increased for employed borrowers as well, the heaviest burden was on the self-employed. Throughout 2020 & 2021 lenders asked for audited year-to-date Profit & Loss statements and letters from CPA’s among other documents.
Many strong self-employed borrowers were turned off by cumbersome documentation. They stayed out of the game.
The great news is that in 2022 – many new and exciting options for self employed and real estate investors have hit the market. The programs allow self employed clients to document income through means other than personal and business bank returns.
Business Bank Statement Program – clients who use this option can provide either 12 or 24 months most recent business bank statements. Lenders will use these statements to formulate a monthly average of allowable deposits. The clients can then use a percentage of these deposits as verifiable income.
Investor Cash Flow – this program is designed for experienced real estate investors. Generally a 1 to 2 year history of real estate investing is required. For this investor program the expected monthly rental income from the subject property just needs to be greater than the total monthly housing payment. The anticipated rental income is determined by a fair market rental analysis.
Asset Qualifier – the asset qualifier is a great program for clients who may not show much income on tax returns but have significant liquid assets. For this program the lender will use a percentage of verifiable allowable liquid assets. The asset qualifier is a great option for retirees, clients with primarily fixed income and self employed borrowers.
1099 Income Loan – clients who are paid on a 1099 are viewed similar to self-employed clients when it comes to mortgage underwriting. The 1099 program allows clients to qualify based on verifiable 1099 income without having to provide personal tax returns.
Low Down Payment Jumbo – there are now jumbo loans available with a little as 5% down (with no mortgage insurance) for qualified borrowers. The Low Down Payment Jumbo is a great option for self employed (and non self-employed) clients who prefer to keep their liquid assets available for other investment opportunities.
Each of these programs have different credit score and equity requirements. These programs are not suited for all borrowers. However, for self-employed clients that fit into these programs they are great and much needed options.
Send me a message if you would like any additional details on these great loan products.
