have to tell anyone who is self-employed that there are extra costs that go
with the benefits. In addition to the long hours and weight of responsibility
that come with the job description, getting a home loan has always added
special challenges. Now that we are into the new Dodd-Frank era of federal
oversight, some of the changes warrant an early heads-up. The 2010
legislation that went into effect on January 10 created the Consumer Financial
Protection Bureau, with the function of tightening the rules lenders follow in
order to discourage the issuing of mortgages that borrowers can’t be reasonably
expected to be able to repay. To deliver on that worthy purpose, more proof and
more paperwork will be required to support the income claimed on loan
applications (here you might well be hearing an imaginary smacking sound from self-employed persons reading this and whacking
their foreheads—paperwork is the bane of the self-employed). If you are
your own boss and getting a loan in Greenwood
Village is on your horizon, take heart! Just because it may
be more difficult to apply for home loan doesn’t mean it’s impossible.
lending rules describe eight specific factors lenders should verify and
document before advancing home loans. This includes the borrower’s assets,
credit history, employment status and other debt obligations. The penalty for lenders
who fail to do so adequately is that they may be legally liable if a borrower proves
unable to repay.
self-employed, the extra burden can come with the requirement that borrowers be
able to show consistent income (hear that forehead-smacking sound again?) The
general rule is that borrowers be able to provide at least two years’ worth of
personal tax returns. Since self-employed people getting a loan in Greenwood
Villageoften have perfectly valid reasons for
fluctuating annual incomes, it’s vital to
talk with a broker and lender
as early as possible to establish the taxable income level needed to
qualify for a loan.
should cover other areas. For instance, self-employed people have greater
flexibility than most when it comes to reporting deductible expenses on their
income tax forms. Since those same deductions result in lower net incomes, that
can be problematical when it comes to getting a loan. One way to counter that
problem is to demonstrate that the expenses incurred were used to buy things
that will improve their business in the long term. Another approach is demonstrate
that similar expenses are not likely to re-occur (particularly apt when a
business is just starting up). If you are
among the self-employed—and plan on getting a loan—planning is key. Get your ducks in a row now so the loan process
doesn’t derail you later. It’s never too early to call me as an early resource before
we get to move on to the fun stuff—your home search!
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Jason Peck is a Broker
Associate at Keller Williams. He has been recognized locally and nationally as
in expert in real estate. Locally he is 6th in Denver Metro home sales out
of 5,000 agents and has been recognized by the Wall Street Journal and Real
Trends as one of the top selling agents in America. He is co-author of
the National Best Selling Book, “The New Rise in Real Estate”. For more
information feel free to contact
himor call 720-446-6301. Photo provided by www.freedigitalphotos.net
Being Your Own Boss and Getting a Home Loan by Jason Peck
Author:Jason Peck Phone: 720-446-6301 Dated: March 28th 2014 Views: 3,598 About Jason: ...
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