Question for the Loan Gurus on Self Employed Income

[Anonymous]

I really want to refinance before rates go up, and need both my husband and my income to do so. He got a small raise this year, and my self employed income this year has been higher, which we'll need to show to qualify. I know as a self employed person I need to provide tax statements to verify income. I don't plan on filing until April, so my question is can I give the loan officer my 2010 taxes before I actually file them? Will they need 2 years of taxes, and are these numbers averaged when establishing income, or just the higher number taken into account? And then what documents does my husband need to provide for his income? Pay Stubs? W2s?

[Anonymous]

Taxes will have to be filed as they will request transcripts from IRS.  You can not just write up a 1040 and submit it.

They will average the last 2 years adjusted gross income, so any deductions would be counted into that.

[Anonymous]

Thanks Mickie - then second question is if I file my taxes early do they have to be paid at the same time? Will it be disapproved by underwriting if the taxes aren't paid yet?

[Anonymous]

yes, taxes mut be paid.

[Anonymous]

We are trying to put every penny of savings into paying down the mortgage to a point where it can be refinanced, besides our retirement fund contributions. Will the lender require reserves - and if so do 401k and ROTH IRA funds count? I was hoping to put the money I have for my taxes towards the mortgage as well, and take on an IRS loan instead. An IRS loan will stop a refinance approval?

[Anonymous]

By IRS loan I assume you mean payment plan.  Yes, that will ill a refi.  All taxes must either be paid, or if in a payment plan, it must have been active for more than 12 months with perfect payment history.

As far as reserves, I am not sure.  It depends on the file and what type of refi you are doing.  It always helps. 

[Anonymous]

Thanks so much for your responses, Mickie! It all really helps me figure out a plan for the next few months. Anyone with crystal balls out there who would venture a guess as to whether rates will be higher, lower, or the same in April 2011?

[Anonymous]

I would expect them to be creaping back up by then.  There are signs the economy is starting to recover (not that it feels that way), almost all trusted economists are saying a double dip is probably past us, elections are over so the political push to keep rates low is now gone for awhile, and the need to start addressing the long term issues in the gov't and our economy are likely to pressure things up a bit.  I do not think you are going to see a couple point jump by then, but I would expect them to be up solidly in the 5's or so.  But there is no real way to know and too much time ahead to wager a real guess

[Mark_in_Pasadena]

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@Anonymous wrote:

Thanks so much for your responses, Mickie! It all really helps me figure out a plan for the next few months. Anyone with crystal balls out there who would venture a guess as to whether rates will be higher, lower, or the same in April 2011?

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They have a good chance of going lower after QE2 is implemented by the Fed Starting tomorrow.  Mr. Bernanke will be running the printing presses full steam 24x7 and buying mortgage securities nobody else wants at the artificially low prices, all purchasing will be done with the freshly pressed dollars.

Don't be surprised to see 3.75% 30-year fixed rates by April 2011.  Japan & your 2% mortgage rates: here we come!

[Anonymous]

I hope you're right Mark! (at least for the sake of my mortgage payment, lol)