Being a business owner has advantages but not when trying to finance a home. Many self-employed business owners are told by lenders every day that they cannot qualify for the home they would like to buy or refinance due to the complicated nature of their tax returns or business structure.

Many mortgage brokers and loan officers simply do not understand how to calculate self employment income using personal and/or corporate tax returns, and most underwriting guidelines do not allow a sizable amount of self employment income to be considered for qualifying.

In the old days, a self-employed business owner would go the local bank where the bank officers had first hand knowledege of the borrower's business, their credit, their net worth and most importantly the character of the borrower and his or her capacity to repay the debt. If everything made sense they would make the loan because they were going to be keeping the loan "on their books."

Well, all of this changed with the creation of the "secondary markets" (and Fannie Mae and Freddie Mac) which greatly increased the ability of all lenders to make more loans and it gave banks a place to sell their loans. Banks no longer had to keep the loans on their books and it has been difficult for the self employed to get a mortgage ever since.

We offer full doc loans (using tax returns) and we have a few reduced documentation loan programs for highly qualified borrowers for the purchase or refinance of a principal residence or a second home that are underwritten using the old rules for qualifying the self-employed. For these programs, borrowers must have an impeccable track record of fiscal responsibility, excellent credit and credit scores, significant assets and a proven capacity to handle their financial obligations.

We currently offer 3 reduced documentation options:

• Stated Income Loans - Income is disclosed on the application, assets are verified. 700 mid FICO score, minimum 20% down payment, cash reserves required.
• No Income Verification Loans - High FICO scores, 10% of the loan amount in cash reserves, 20% minimum down payment.
• No Ratio Loans - Excellent assets, excellent credit, minimum down payment 20%

Related Article: The New (Old) Rules for Stated Income Loans