Self Employed Florida Mortgage Lenders
Bank Statement loans for self-employed borrowers who cannot qualify for a traditional bank loan because of business expenses. Self-employed Florida mortgage Lenders are perfect because while most Florida self-employed borrowers earn a solid income, they show a smaller net income on their tax returns. Our Florida mortgage team is well-versed in these bank statement only loans and placing the borrowers where they can get the optimal loan to fit their needs.
Florida Self Employed Advantages Include
About Florida Self Employed Mortgage Lenders
If you’re one of the 1000’s of Florida self-employed workers that write off to much income to qualify for a Florida mortgage? it is now easier than ever to be self-employed get approved for a Florida mortgage if you are self-employed and have sufficient income and payment history you can now qualify for a bank statement only Florida mortgage. Fannie Mae has relaxed some of their guidelines for documenting self-employed income. Even today Florida self-employed mortgage applicants are having trouble betting approve for their Florida dream home. Here we have provided the much-needed information to help you get approved for a self-employed mortgage loan using bank statements only to document your income and ability to make the Florida mortgage payments.
How Long Must You Be Self Employed To Qualify?
Most Florida mortgage lenders that provide self-employed mortgage loans want to see proof of at least 2 years business history. Some Florida self-employed mortgage lenders only require 12 months personal bank statements but still want proof of stability for at least 2 years. For self-employed Florida business owners using business bank statements 24 months business bank statements are required and a Florida profit and loss statement signed by the Florida business. NO Tax Returns Needed!
Self Employed Income Using Tax Returns Make it Hard To Qualify
A borrower’s income is still probably the single most important factor in qualifying for a Florida mortgage. For traditional Florida mortgage lenders to know what you earn, they will want to see at least the last two-years of a self-employed borrower’s Schedule C from an IRS Form 1040. Schedule C is the tax form that represents the income or loss from your Florida business. If income increases between year one and year two, Florida mortgage lenders will take an average of the two years. However, if the second year’s most recent income is lower than the first year, Florida mortgage lenders are required to use the lower number. With our bank statement only mortgage program this is not an issue because the lender will add u p your most recent 12 or 24 months bank statements and average out your income.
Self Employed Florida Mortgage Loans
If you’re going to mortgage your Florida home purchase with traditional financing that is conforming to Fannie Mae and Freddie Mac guidelines you will be required to fully document your self-employment income via adjusted income on your 1040 tax returns. It is standard that Fannie Mae will want a full 2 years worth of tax returns to document your net income after expenses. For many Florida self-employed mortgage applicants to provide this requirement can be difficult for self-employed Florida business owners.
If you’re purchasing a new Florida home or refinancing your existing Florida mortgage there is a specific process Florida self-employed must go through to get approved for a Florida mortgage. Under the old guidelines, self-employed works had difficulty qualifying based on proof of income. This happens for a variety of reasons including how a business is structured most importantly how much income you write off as a self-employed Florida mortgage applicant.
Florida self-employed workers have no history of paychecks that can be documented because the employer usually pays the w2 employee expenses. They take may take distributions with no regular amount or frequency making qualifying based on income difficult even with bank statements and tax returns. If your business is new and you don’t have documented sources of revenue or even two years of federal tax returns this can make qualifying for a traditional mortgage difficult, if not impossible.
If you have a history of paying yourself from your Florida business, Fannie Mae’s guidelines state that your business only needs to have adequate income to support your future distributions. Most Florida mortgage lenders will require documentation that your Florida business is legitimate and stable. This could be provided in the form of your letters of incorporation or the K-1 filing which highlights your percent Florida business ownership.
The underwriting process is still going to be more complicated for Florida self-employed mortgage applicants. Fannie Mae and Freddie Mac have similar processes to verify income from Florida self-employment.These requirements follow the ability to repay guidelines to ensure that you have adequate income from Florida business owners ability to repay the loan. Florida mortgage lenders adhere strictly to these guidelines so that the loans can be sold to Fannie Mae and Freddie Mac.
If you don’t have two years of business tax returns the guidelines you may be able to qualify for a bank statement program using your personal bank statements as an alternative to a conventional mortgage. These types of programs are available from boutique portfolio lenders and offer reasonable rates and fees.
Roadblocks for Florida Self Employed Mortgage
The most common roadblock self-employed workers face is proving how much your net income is from the business based on tax returns and deductions. You may have significant cash flow in your business but could be in for a shock when you learn your qualified net income based on tax write-offs and expenses for your business. If you cannot demonstrate sufficient net income from your business it still may be possible to qualify for a bank statement program using income on your personal statements.
Florida Business Tax Deductions Lower Documented Income
Running a business as a self-employed worker can be very expensive and often comes with significant tax liability. The temptation can be to lower your taxable income with deductions. These deductions include business expenses for things like equipment, expense accounts, and annual depreciation.
Taking business deductions may save you money on your taxes but it could make it more difficult to qualify for a mortgage. As a self-employed worker, you are qualified for a mortgage based on your net income, not gross income for a traditional worker.
Most self-employed business owners claim as many tax deductions as the law allows which significantly lowers your net income and therefore your ability to qualify for self-employed home loans.
Debt to Income Ratio for the Florida Self Employed
Maintaining a low debt to income ratio is important in qualifying for any mortgage loan. As a self-employed worker, your debt to income ratio is calculated differently from traditional workers.
Your debt ratio is calculated by your average net income from the most recent tax returns along with current year income and expenses. In order to be approved for a self-employment mortgage, your debt-to-income ratio cannot be more than 43 percent.
If you’re considering purchasing a new home or refinancing your existing mortgage you might want to consider taking fewer tax deductions to reduce your debt-to-income rate with the highest possible net income.
Florida Mortgage Documentation Makes a Difference
The loan process you’ll go through as a self-employed business owner is the same as everyone else. Where it gets sticky is providing your income documentation. The more you have to prove that business income is sustainable and able to pay the easier the process becomes to qualify as a self-employed Florida business owner.
Keeping accurate records of income and expenses will make it easier to prove that you are a sustainable business as well as documenting net income which is required for maintaining a favorable debt ratio.
Mortgages for Florida Self Employed Business Owners
Florida Mortgage lenders generally consider self-employed business owners to be higher risk than those who work for a traditional paycheck. Higher risk Self-employed Florida business owners pay more at closing and over the life the loan with higher interest rates. If you’re accepting a higher interest rate when you purchase your Florida home you may be able to lower that rate down the road by demonstrating a reliable payment history and refinancing.
How You Structure Your Florida Business Matters
There are several different ways to be self-employed and underwriters treat them all differently. The most common business structures include sole proprietorship, partnerships, LLCs and S corporations.
Under a sole proprietorship, your business income is reported on schedule c of your tax return. With a partnership profits in the business are split between partners based on their respective percent of ownership. Limited Liability Corporations are considered pass-through entities for tax purposes. S corporations follow strict guidelines for distributions. Depending on how you structure your business you could potentially pay yourself on a w-2 and avoid the hurdles of a self-employed mortgage completely. Your accountant can help you choose the optimal business structure for your company.
No matter how you choose to structure your business there are steps you can take to maximize your income from self-employment and maintain an optimal debt ratio. All of these factors are under you control and are part of maintaining healthy finances as a self-employed worker.