Getting a Mortgage Loan Being Self Employed? 10 points?

so we recently assumed ownership of a family business and currently it still stands as solely a verbal agreement. We haven't actually transferred the business to mine and my husbands' name.

We have been employed at this business for 5+ years so we will have W2's but not showing near the amount of income we'd need them to show.

Since we have assumed ownership of the company (over 8 months ago) our income is MORE than needed for the amount of mortgage loan we'd need to take out. PROBLEM is: we can't prove our income on a W2 or tax return document.

We also have a bulk of income saved away in cash.

Which is not helpful when we need to prove we CAN afford the mortgagee loan and are capable of making the monthly payments.

Can you Please tell me what our options are in this scenario?

Large down payment?

Co-Signer? (would like to avoid this if possible)

7 Answers

  • 8 years ago
    Favourite answer

    Your note is hard to follow:

    if the business in still in someone else's name = the money you earn for 2012 would be paid as W2 income.

    if you are claiming the business for 2012 = the money would be on your tax return which you can file in about 32 days.

    if "we have a bulk of income saved away in cash" means you aren't claiming your income = the money does not count since you haven't legally paid taxes on it.

    If you prove the income for 2012 which should not be a problem = you should be able to find a lender. You will need at least a 20% down (maybe as much as 30%) and you will pay a higher interest rate.

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  • M W
    Lv 7
    8 years ago

    Instead of squirreling away all that cash, you would have been better off to reorganize the business into a corporation. As a corporation, you would pay yourselves regular weekly paychecks, pay the appropriate taxes and at the end of the year, get W-2's.

    The way you are doing it now will not help you in getting a mortgage. Since the business is not even in your names, you have no proof of income.

    With a large down payment, the proper REPORTED income and tax returns you should not need a co-signer. Why can't you prove your income? If the business is profitable and you took out cash, it has to be recorded somewhere. Who's doing the books. You really need to have an accountant help you set things up in the proper way.

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  • 8 years ago

    Lenders will want to see 3 years worth of tax returns/business records to prove self employed income. Even if you had proof of this year's income, it would not be enough. You have to show that bigger income is STABLE and not just a fluke for one year.

    Source(s): BD
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  • 7 years ago

    Many self-employed people run into difficulty when it is time to buy or refinance a home with a bank because they typically write off a majority of business expenses on taxes. Even though they are pursuing the great American dream of owning a successful business, by limiting tax liability they are setting themselves up for headaches and frustration when they try to obtain a mortgage.

    Unlike most banks and brokers, we are one of the few banks in the Nation that does not require 2 years of tax returns, P&L's or K-1's. Our Portfolio programs allow you to qualify using 12 months of personal and/or business bank statements.

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  • 8 years ago

    A larger down payment always works.. the question is just how large. The lender has to feel comfortable in being able to recover a default plus the costs.


    1) Get the City Business license re-issued to show the business is now in YOUR names. Have copies of the transfer papers also in case you are asked for them.

    Get copies of last years BUSINESS records to show that the BUSINESS makes a profit.

    Whatever records you have to show earnings now (under your ownership) compared to last year (under the old ownership) should be handy.. That way you can show that the change in ownership does not impact the profit line for the store. Your bank statements should also back up the receipts.

    Take it all down and try... all they can do is say no...and they MIGHT say yes.

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  • 8 years ago

    A co-signer will not help. You might manage after 2 income tax returns, but most likely you will need to wait 3 years.

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  • 8 years ago

    Large Down Payment.

    Search "ways to improve my FICO Score."

    Source(s): My life experience.
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