Self Employed? Here’s what you need to know
by Paul Vattiat

Self Employed clients have typically had a tough time getting a mortgage. Here’s an explanation of why this happens and some recommendations to ensure you have the best experience as a client.

Most business owners hire a good CPA to prepare their taxes and leverage every legal avenue to reduce their tax liability to Uncle Sam at the end of the year. The problem is that the strategies that save you money at tax time can also reduce the income you show on paper for underwriting.

The underwriter is going to evaluate the health and stability of your business tax returns and calculate the portion of the net profit that flows through to your personal returns. There are certain types of deductions that are not actual expenses (e.g. depreciation) that can actually be added back to your income for qualification purposes.

This can get pretty complex depending on the number of businesses you own and types of tax returns you file, and a miscalculation can be devastating. My advice for self employed clients would be to interview your Loan Officer and ask them about their experience working with self employed clients, particularly some of the tough cases they may have completed. Self employment can turn complicated very quickly, so even if your situation seems simple to you, it may not be as straightforward from a lending perspective.

For professional guidance, please click the button below.