Mortgage Options for the Self-Employed – Entrepreneurs and the self-employed are not uncommon in Los Angeles County. Therefore, the chances of this demographic applying for a home loan is not that rare either. But, have you ever tried to get a home loan without verification of income? It’s not as easy as handing over a W-2 or proof of monthly income. But, many self-employed individuals and families may not have the exact proof when it comes to W-2s or even tax returns. While tax returns are probably the most common way for self-employed individuals and entrepreneurs to obtain a home loan, they’re not the only way.
Self-employed individuals and families can receive income from a variety of different ways. Perhaps last year they worked three different jobs plus some self-employment and this year they have worked two separate self-employment jobs. The income can get quite scattered and while it all benefits to the debt to income ratio that a borrower would need to prove, sometimes, proving that income is a little tricky. This is where bank statement loans come into play.
12 years ago when the subprime mortgage bust corrupted and destroyed much of the housing market and economy, lenders were passing out loans left and right regardless of income. This predatory lending got a lot of banks in trouble and it lost a lot of people there homes. Today, many more obstacles are in place to protect both lenders, banks, and individuals. We certainly don’t want to loan more money than you can afford to pay back. But it gets a little trickier for the self-employed. This is where bank statement loans have become an option.
There are several ways to go about this – Mortgage Options for the Self-Employed
- To obtain a bank statement self-employment loan you still need to have decent credit. A minimum credit score of 600 is required to be eligible for a stated income employment loan.
- In the state of California, borrowers may borrow up to $3 million and a minimum of $150,000.
- There is no prepayment penalty
- foreclosures, short sales, and bankruptcies can be disregarded with a letter of explanation but each lender is different.
- Some condominiums and townhouses may also be considered.
- Lenders use personal and/or business bank statements to obtain income.
- Interest rates may be slightly higher than a typical self-employment loan but some competitive rates can start as little as 3.25%.
- Applicants are required to put down as little as 10% with no mortgage insurance.
- If applicants are business owners they do not have to be the 100% owner of the business.
There are a lot of different options when it comes to self-employed home loans. In 2020, there are several new home buyer programs including the CalHFA zero interest program, schoolteacher and employee assistance programs, and even grant and down payment assistance programs.
If you are self-employed and looking to either refinance or obtain a home loan, don’t be discouraged. California has a lot of great options for the self-employed and entrepreneurs in our state.