Self Employed In North Texas - Current Market Tough For First Time Home Buyers?

[Anonymous]

hi -

hope there is an easy answer to this!
i'm self employed..have had the biz for about 5 years now.
my scores are not the best, but i am working on it and they are improving....my EQ is 661....TU & EX are mid 500's (things are being deleted though).

within the year i would like to purchase a house....but i have no idea where to start.
with the market the way it is right now...would it be difficult for self employed first time home buyer to purchase a house in the 150,000-250,000 range?

would i qualify for an FHA loan? what do they expect?

thanks for the help....i am so lost when it comes to these things!

Message Edited by molly73 on 09-22-2008 08:09 PM

[Anonymous]

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@Anonymous wrote:
would it be difficult for self employed first time home buyer to purchase a house in the 150,000-250,000 range?

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That depends - how much income have you reported on your tax returns in the past 2 years, and what are your current debts (minimum monthly payments)? Unfortunately for small business owners, lenders are being pretty strict about documenting income these days, which means tax returns for the self-employed.

[Anonymous]

thanks for getting back to me....my income is about $80,000-$90,000 a year...it's been going up each year. biz has very little over head....at the most maybe $2500 a month in expenses (outsource most-work from home). currently pay $800 in rent now....have a $450 car payment which ends in nov....very few cc cards.....low CL....been getting no pg credit through the biz....been building that up...been happy with the results.

[Anonymous]

Is the $80-90k the net income you've reported on your taxes the last 2 years? Are you deducting the $2500/month expenses on your taxes (so that the $80-90k is true net income after expenses)? Hopefully one of the mortgage experts will run the numbers for you, but just by "eyeballing" it, I would say $150-250k seems reasonable for you if those expenses are deducted, especially after the car is paid off. Rough numbers in those cases:
80k/yr = $6.6k/month
$250k 30yr fixed mortgage at 6% (w/ 1.25% property tax and 0.5% PMI) = $1863 PITI
DTI (housing only) = 28% (OK)
DTI (housing + car) = 35% (OK)
DTI (housing + expenses) = 65% (NOT GOOD)
DTI (housing + car + expenses) = 72% (NOT GOOD)

[DallasLoanGuy]

We will use what you claim after deductions on the schedule C. We can add back depreciation though. Nothing hard about self employed loans.... you claim what you earn or you do not!!! You cannot have your cake and eat it too. So, if you write off a lot, you will be stuck with that lower reported income.

[Anonymous]

Dallas, I am in the process of putting myself on salary and having an actual paycheck which will be w-2'd, etc. - will this help in the approval process, or will it make no difference because at the end of the day I still own the business?

[Anonymous]

bump

I'd like to know th answer to UpUpUp's ? also - SE also with a lot of write-offs but as I look into the future for homeownership I am realizing that the lower reported income may hurt.

[DallasLoanGuy]

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UpUpUp wrote:

Dallas, I am in the process of putting myself on salary and having an actual paycheck which will be w-2'd, etc. - will this help in the approval process, or will it make no difference because at the end of the day I still own the business?

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no difference....

you are still self employed.

and it would be fraud to present 2yrs w-2 to a loan officer and not disclose the business relationship..... all the while you act like a w-2 employee/

one thing!!

if you have a strong file.... with good assets.... and you put on the application that you make $XXX..... it is possible that the automated underwriting software does not ask for verification. (conventional.... fha will ask)

[Anonymous]

Hmmm, I though that would be better. Bugger! Well, biz incorporated and the business is doing well so I have to do it to satisfy the IRS now anyway. I wouldn't have not disclosed that I owned the business though. That's why I was wondering if it would make a difference.

I do plan to go conventional at this point. I don't want to go FHA, just because of the PMI thing. 15 years no matter what, right? I'm shooting for credit scores over 760 - already have one that's 763 and I can put 10-20% down and still have a year in reserves. So, hopefully that will bump me into automated approval. Doesn't the underwriter still ask though??

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DallasLoanGuy wrote:

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UpUpUp wrote:

Dallas, I am in the process of putting myself on salary and having an actual paycheck which will be w-2'd, etc. - will this help in the approval process, or will it make no difference because at the end of the day I still own the business?

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no difference....

you are still self employed.

and it would be fraud to present 2yrs w-2 to a loan officer and not disclose the business relationship..... all the while you act like a w-2 employee/

one thing!!

if you have a strong file.... with good assets.... and you put on the application that you make $XXX..... it is possible that the automated underwriting software does not ask for verification. (conventional.... fha will ask)

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[DallasLoanGuy]

fha pmi = 5yrs minimum. or until it is 78% ltv. 10% and 15yr note = no pmi. 20% down may get a streamline accept. this will only verify job, not income.