Check out this latest video where we discuss financing options for self-employed individuals with one of our lending experts, Scott Hastings.
Licensed Mortgage Advisor
Licensed in FL, NC l-154648 and SC
8015 W. Kenton Cir STE 240 Huntersville, NC 28078
Here's the full transcript!
Speaker 1: So today I'm with Scott from Angel Oak Mortgage and Scott, I want to thank you very much for coming over. And speaking with me. So we had a, a couple of cases that we've been working with and then wanted to bring Scott in and kind of go over a little bit more detail because it is something that pre-bid coming across more in the market that it's just not getting answers and we want to get this out there to know there are answers to this problem. So first off, so Scott, can you explain to us a little bit more about what the, is the challenges a self-employed person past?
Speaker 2: Right. Okay. So the good thing about being self-employed is that you can write off a lot of expenses. The bad thing about being self-employed and getting a mortgage is that you can write off a lot of expenses. So what we see and what borrowers have seen up until this product came out is that they would go to get a mortgage. They would the lender would look through their tax returns and they just would not have enough money to qualify or enough income to qualify for the house that they wanted. So that's been the problem. What we've come out with and you know, angel and home loans is the largest lender in America. This type of mortgage is a bank statement homework. That is only for self-employed homeowners. So what we do is we use bank statements instead of tax returns. We don't even look at tax returns.
Speaker 1: Okay. All right. And why is it not a typical thing to go traditional for a self-employed person?
Speaker 2: Well, I should first say that the first thing that I do is get the tax returns because the best way, of course, is to use tax returns to get a conventional Fannie Mae mortgage with a low-interest rate and minimum down payment and all that. So I will look through the tax returns see what the write-ups are, do the income calculation and basically see if you qualify. So that is definitely the best way to go. Okay. But when that fails, the only other option up until this product came around was to claim more income. So typically it's going to be a lot better off. I'm not a CPA or a financial advisor, but it's going to be a lot better off for you to take advantage of your tax deductions than to claim a lot of income and pay taxes on it just so you qualify for a mortgage.
Speaker 1: Okay. So if this is something that a, a self-employed person comes across, they're not able to qualify traditional but they, they're making money, what do you need from it? What is the process for them to, to see if this they could qualify for sure. Okay.
Speaker 2: So what I'll do is I request the last 12 to 24 months of bank statements. Typically that's going to be the business bank statements. I have the borrower, I usually send them like a Dropbox file or somehow get them to even bring over the physical bank statements. I'll go through them all, look at all the deposits and, you know, figure out what the income is. And then we can submit it to underwriting, we'd have an income desk that, you know, it looks through everything and basically validates what I've come up with. Okay. so going through that process or what is there, what kind of like you said, like bank statements or all kinds of things do they need? Right. Okay. So really the only difference between a bank statement loan or traditional loan is we don't use the tax returns.
Speaker 2: So I would have somebody go online or I would send them a link on their phone and fill out an application. They just fill it out like any normal application, put their income in there. And then when I request the documentation, which I do for all mortgages, that would be instead of, usually, it's in the last two months of your bank statements. Now it's in the last 24 months of the banks. They went, that's how we do the income. You know, we would request not, we would not request tax returns. We would request a copy of the driver's license. And then when you go through the underwriting process, I would typically go to the secretary of state website, you know, pull down the documentation from when the corporation was formed. Because I will go over just a couple of things that you do have to have.
Speaker 2: So a lot of people will ask, Hey, I formed my business last year. Can I get a mixtape? You must've been in business for a minimum of two years in order to qualify for a bank statement loan. And that two years starts the date your LLC was formed. So that's a qualifier. Another difference with a bank statement loan is you have to put at least 10% down. You know, with the Fannie Mae loan or an FHA loan, you can put, you know, three, three and a half percent down, but you're gonna have to put at least 10% down for a bank statement loan. And then unlike a lot of other traditional mortgages, you are going to have to have some reserves so you don't have to have a minimum of six months of mortgage payments and reserve after closing. Okay. I guess that kinda it going off of that with you having a reserve or what is the typical amount a person could qualify for?
Speaker 2: What I typically see is people have plenty of income when you use bank statements to qualify. The way we do that is we take 50% of the deposits into the bank statements, and that's your income. So if your business has $50,000 a month, then average deposits, then you've got $25,000 a month in income. So really the debt income ration isn't the issue. The issue is if there is one the down payment. So that's basically it. I mean, people can have a lot of vet and qualify for a bank statement loan. Okay. So anyway. Okay.
Speaker 1: What're some of the things that could stop someone from getting one of these kinds of loans?
Speaker 2: Credit score, of course, you have to have at least a six 40 credit score. Okay. You know, time in business, you have to have been in business for at least two years. And ownership, you have to own at least 50% of the business.
Speaker 1: That's basically it. Yeah. How long is the process to find out? You do qualify for something like that? It's the same as any other mortgage. So we're just looking at banks things instead of paycheck stubs and for to do income calculations. So someone has their bank statements readily available. You said back 24 months, 24 months, but the best interest rate is going to be 24 months. Okay. So at the best 20 the best interest rate, 24 months had that out and you can within a day find out what they could qualify for. Okay. And if you already tried to traditional and it did not work out for ya, I had to just do this process within the day to find out what this is an option for you. Especially since you already found out you can't go any further on the traditional side. So from the cases, you've had up to now and that one debt may work together with some of the feedback from the individuals at the end. When they come to you,
Speaker 2: The feedback is fantastic because most people have been renting their houses, didn't realize that they could get a mortgage so they didn't even know this product existed, that it's not readily known that this product exists. So we're trying to get the word out there that it does. You know, people are very happy with it. Yeah.
Speaker 1: Excellent. So Scott, how could someone get ahold of you if they want to find out if they qualify? They can go to my website at https://mortgagesbyscott.com/
Speaker 1: Scott and I work together very closely, so we'll be able to have this as smooth as possible of a process for you. If you need to get ahold of me. Again, Sean Herndon with Beacon Group Properties at Keller Williams. If you have any questions at all, you could get ahold of Scott or if it makes sense to take that next step. Just get a hold of us and we would love to go over the options for you. Thank you, and I hope you have a good day.
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