If you are self employed and want to get a mortgage loan, it’s tough going out there. If you have an “unattractive” Schedule C, odds are you won’t qualify.
Briefly, according to a mortgage broker friend of mine, your net profit for the past 2 years is averaged, then divided by 24 months to get your net monthly income. 45% of that figure is the maximum mortgage payment you would qualify for. If you are showing very little or no profit at all, that leaves almost no income left to make a mortgage payment. Decline.
The new lending rules effective in 2014 will make it more difficult for a lot of people to get qualified for a mortgage loan, not just self employed folks. But with a nice rebound in home prices, those of us in the seller carry back business have seen a big spike in activity, and a more attractive pricing experience for sellers. So, if you are self employed and have some cash, ask a seller of a property you want to buy if he would be willing to carry back the note. Offer a strong downpayment – 20% or more -. Run your own credit and give your score and history to the seller. Be willing to pay a higher interest rate because the seller is making an accommodation by taking the place of the bank.
Once the transaction closes and you have made several payments, the seller will probably find an attractive market for this note should he want to cash out. Note prices have risen gently and many sellers of high quality notes are receiving 80%++ for their notes.
Don’t despair if you are self employed. If you find the right property and the right seller, you may not get a bank loan but you certainly can negotiate an installment sale that will benefit you, your seller and the housing market.
