Many people believe that they cannot qualify to get mortgage, because they cannot supply tax returns. However, it is possible to receive a mortgage and purchase a home you love without the use of tax returns. The following are six ways:
1. Get a Mortgage as a Business Owner Without Showing Tax Returns
It is common for the self-employed to have several tax write-offs when filling out paperwork for local, state, and federal tax purposes. However, this can become problematic when it comes to applying for a traditional home mortgage, the same way that everyone else applies. Too many write-offs automatically look like the borrower has a risky debt-to-income ratio, by only looking at the writing on the paper.
A good mortgage option for a business owner with several tax write-offs is seeking out a bank statement mortgage. This mortgage option requires at least a 600 rating for a credit score. However, the approval process allows someone who is self-employed with a unique system of tax filing to prove his/her income with bank statements and calculations based off the bank deposits made. This mortgage option gets rid of any requirement to supply tax return paperwork for proof of income.
2. Use Bank Statements from a Business Account If Self-Employed
If you use the business bank statements to show proof of income and qualify for a bank statement mortgage, be the sole owner of the business attached to the account used for income.
With bank statements from a business, either use an average of twelve months’ deposits minus 50% expenses or twelve months’ deposits minus any expenses confirmed by a licensed CPA. Using a licensed CPA to confirm your expense factor allows you to verify that your expenses are lower than 50%. This means that more of your income verifies that you are stable and look better for a mortgage application.
3. Use Personal Bank Statements to Qualify for This Mortgage Option
If you use personal bank statements for a bank statement loan to qualify, a borrower can be a partial owner of a business. This is opposed to the sole and only business owner. To provide income with personal bank statements, you need at least two years of working the business. Calculate your income based on 12 months’ worth of bank deposits. Any incoming deposits made to the account from sources other than your business do not count toward income.
In addition, provide about three months’ worth of business statements from your bank to show that the business is stable. It also shows that deposits are coming in from a business-type account to your personal account.
4. Don’t Use Any Bank Statements
For a very solid candidate that meets a series of requirements, a profit and loss-only mortgage is an option. Proving that you have a solid stream of income to pay the loan comes from a profit & loss statement. For acceptance, get a legal CPA to put the statement together. Along with the profit and loss statement, the CPA includes a letter claiming other solid facts about your business. These facts include the borrower’s business name, how the borrower files tax returns, the percentage of ownership the borrower has in the business, and the exact time when the accountant worked with the company.
Most often, profit and loss home loans mean portfolio loans. These types of loans are non-conforming mortgages or “cookie-cutter mortgages.” They bypass standard and common underwriting program processes set by Fannie Mae and Freddie Mac.
5. Qualify for a Mortgage Without Tax Returns as an Investor
Real estate investors typically take advantage of several tax write-offs, because these are beneficial and freely legal to use. These write-offs cause the gross income to be below qualifying markers as it reads in paperwork (hard solid proof and evidence to a lender), as compared to the actual take-home amount of payments is.
Many real estate investors find success with using a cash-flow mortgage. This type of mortgage uses income approval by the actual flow of cash from the property that you invested in — not on personal income records as they look on provable paper.
To verify this, a licensed appraiser conducts research to confirm fair market rent the property pays for itself with rental income. If the property has negative cash flow, there is still a chance for mortgage approval. It depends upon the down payment amount or any existing equity in the property if you seek a refinance.
The cash-flow mortgage is a very promising option for many investors. In addition, it does not restrict you for approval based on the number of properties on which you carry mortgages.
6. Qualify for a Home Loan Without Tax Returns on a Regular Wage
For a borrower who is a wage earner, which is an hourly or salary employee, there are ways that you can apply for a mortgage without being required to provide tax returns for mortgage approval.
Many traditional requirements let you provide just a W-2 and the most current and up-to-date 30-day pay stub to prove your stability of income. As a wage-earning borrower, be prepared to order W-2 transcripts from the IRS to confirm IRS records match what you provided to the lender. The lender does this step all on its own.
Lenders also often order verification of employment to ensure a wage-earner borrower has current employment at the place of business reported on the application just prior to the closing of the loan. If you received any bonuses or overtime pay, it is possible that your lender asks for full written verification of employment from the business that you work. This helps solidify and prove the amount of incentive pay on average you received the last two years.
If 25% of the income is a result of commission pay, it is possible that the lender asks for paper tax returns. This requirement pertains to write-offs that commission-paid employees are eligible for on their taxes and that they often utilize.
Conclusion
Get more information on how to get a home loan without tax returns and on all of your mortgage options. Please contact Jackie Barikhan in California anytime.
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