Three years ago if you had a pulse you could probably get a loan. These days, unless you have a W-2 job and pay plenty of taxes with little or no debt and a credit score of 750+, you might find it’s getting tough to get a loan.
Just one of the many tips that I learned today from Joe White during our teleseminar Mortgage Update was how to use a L-O-X (not salmon, in case you were wondering) to get loans if you’re self-employed.
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So, back to the strategy:
Step One: Make sure you’re working with a mortgage banker or broker who has at least 5 years experience. Preferably, select one who was working in 1998. That’s the last time that the credit got tight and if she’s been through that slow-down, she’ll be a lot more resourceful and helpful for this one.
Step Two: Working with your mortgage specialist, determine what your “add backs” are to your income. These are non-cash deductions that reduced your taxable income and benefits that were clearly just for you. Some common ones to add back are depreciation, travel (if you can prove it was for you), auto and health insurance. This is the step where you need an experienced broker helping you, though. Everyone will have a different answer.
Step Three: Have your mortgage specialist write an L-O-X (Letter of Exception). This is a 1-2 page letter that follows a format for the underwriter that lays out and explains the add backs.
If you’ve got a good credit score, this will probably get you your loan. If you’re buying a commercial building, you will need to either come up with a big down payment or get some seller participation because lenders are commonly asking for 50 - 60% loan to value.
Those are just a few of the tips that I learned today on the teleseminar with Joe White. I hope you got as much out of it as I did!
Tags: Business • mortgages self-employed • self-employed mortgages • stated income mortgages