Qualify for FHA Loan for Self-Employed or Independant Contractors is a post from: FHA,VA and Conventional Home Loans in all 50 States

Since the lending guidelines radically changed in 2008 it’s been more difficult for self-employed borrowers and independent contractors to get mortgage financing.  Prior to 2008 many borrowers with this type of income would get “no doc” home loans where they would not have to fully document their loans.  But in 2008 all the “no doc” loans went away and now self-employed borrowers, independent contractors and everyone not paid as a w-2 employee have to qualify based on their most recent two years of tax returns.

So to get FHA loan the first step will be to supply your last two years tax returns for qualification.   So if you are going to be buying in 2010, you will need your 2008 and 2009 federal tax returns all pages,  all schedules.  If you file K1′s or corporate returns you will also need to send those returns in.  For FHA loan approval for self-employed borrowers, the FHA underwriter will take the NET business income off your 2008 and 2009 federal tax returns and average the two years.  So if your NET in 2008 was $80,000 and your NET in 2009 was $90,000, the FHA loan underwriter will use $85,000 as your qualifying income.

It is very important to realize that it is the NET income that will be used for FHA loan approval, not your gross income.  Many self-employed people write off many expenses, so their gross may be high, but their NET may not be low.  This can be a challenge for many.  However, there are deductions that can be added back into your NET income to increase that figure.  We are a specialist at knowing the FHA guidelines and we are able to have many deductions added back into NET income helping self-employed borrowers.  Here is a list of deductions that can be added back to NET income:

• Business use of home
• Depreciation
• Loss carryover’s from previous years
• Mileage depreciation rate (40% of the total per mile auto expense rate)
• and more

Also, if you operate as a corporation and pay yourself W-2, we will still need to look at your last two year tax returns.  If the corporation is showing a loss, that loss amount may have to be deducted from the W-2 income you pay yourself.

The best thing to do if you are self-employed and want to qualify for a FHA loan (or conventional loan) is to call me and send me your federal tax returns so I can go over them in detail and let you know how much income we will be able to count. 

Here are some general highlights of FHA loans:

• Only 3.5% required for FHA loan down payment (vs. 10% down in most cases on conventional loans in California)
• Maximum FHA loan up to $729,750 in many counties of California and other expensive states
• FHA loan interest rates at historic lows (the U.S. Government is currently buying Mortgage backed securities at an unprecedented rate artificially holding down interest rates…this will not last that much longer)
• Seller can credit up to 6% of the purchase price for FHA loan closing costs
• FHA streamline refinance to lower rate options available once you have an FHA loan

Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions at all about getting approved for a FHA Loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

How Your Income and Employment is Evaluated When You Apply for a FHA Loan is a post from: FHA,VA and Conventional Home Loans in all 50 States

 This post is a review of how your income and current employment will be evaluated in the FHA loan approval process. 

Latest two years of employment verified 

FHA likes to see two years of stable employment.  There are many exceptions however for gaps in employment.  For example, if you are just graduating from college or professional training, you do not need two years of employment as long as you can document that you were in school previously and you are now employed in your profession of study.   And there are many, many exceptions.  Please inquire about your situation.

 Overtime and bonus income

To count this you must have received this income for 24 months and we will average this income over the last 24 months.  There must be evidence it will continue.

Part-time employment 

Must have a two year history

Commission income

You must have a two year history and we will average this income over the last 24 months.  Your last two years federal tax returns all pages are required to calculate this income.

Unreimbursed business expenses (2106)

These expenses will be subtracted from you qualifying income.

Alimony and child support income

You can count this income towards qualification if it will continue for three or more years and you will need to provide the divorce decree and 12 months evidence of receipt of funds.  This income can be multiplied by 1.25 since it is not taxed.

Government assistance

This can be counted as income if you can document it will continue for three more years.

Self-employed or 1099 independent contractors

You will need to supply you last two years tax returns all pages and schedules and your NET business income will be what is used as you qualifying income.   There are a lot of details regarding self-employed income, please call or email me with questions.

So that is a brief review of some items that will be needed and how your income and job history will be evaluated when applying for a FHA loan. 

Give me a call (858-922-7899) or email (homeloan8@gmail.com) if you have any questions about your employment history or income, or any other questions at all about getting approved for a FHA Loan.

Warmest Regards,

Rob Chomentowski

Sr. Loan Officer (and FHA specialist)

858-922-7899

homeloan8@gmail.com

Importance of Getting a Pre-Approval Before House Shopping is a post from: FHA,VA and Conventional Home Loans in all 50 States

The very first thing you should do when in the market for home is the get a full  loan pre-approval.  This is true regarding FHA, VA or conventional home loans.  This is very important because your don’t want to waste a lot of time searching for a property until you know for sure if you can get approved and what the maximum amount you can approved for is.  This can be accomplished in a matter of minutes and then you will have the peace of mind that if you make and offer on a home and it gets accepted you will have no problem closing.

Below is a list of what we will do to fully approved your for your loan:

1. We will go through a loan application (most often over the phone).  It is best for me to talk to you and go through the application vs. having you fill one out as this way we get it right the first time and save a lot of time.
2. We will do a credit check
3. I will ask you to send me your last 1 months paystub copies, last 2 years w-2′s and bank statements documenting where you will be getting the down payment.  If you are self-employed we will need your last 2 years of federal tax returns all pages.

After those simple steps I can issue you a pre-approval letter.  In the call we will also discuss the maximum loan amount that you qualify for and what the total payment will be (mortgage + property taxes + home insurance).

If you have any questions or would like to get a fast pre-approval give us a call or email.

Warm Regards,

Rob Chomentowski

Sr. Loan Officer

rob@affinity-financial.com

858-922-7899