There are a few lenders now offering alternative loans to those self employed folks who are unable to qualify for a mortgage with their income tax returns. This is normally the case because of excessive write offs which reduce the net business income to a point where the borrower no longer qualifies. Typically, the back end debt ratio needs to be below 50% to receive an automated approval from the desktop underwriting system. (du) In the case of an FHA loan however the ratios could exceed 50% but not much higher.
So it is possible to qualify with the last 24 months or possibly 12 months of business bank statements or personal bank statements. The actual underwriting procedure varies, however, as a general rule, lenders will take a 24 month average of the business deposits and multiply by 50% and use this number for qualifying income. In the case of personal bank statements, 100% of the deposits will be used. Of course, the bank statements will be scrutinized, and any transfers between accounts will be backed out of the equation.
It is possible to purchase a home with only 10% down payment with one of these bank statement programs. The interest rate is higher the a traditional Fannie Mae loan, however it will get you into your home, and you can later refinance out of the loan into a better loan when your income taxes are looking better.
For more information on bank statement loans, give us a call at 949-922-4200.