Recently I was surprised to learn that the self-employed and the workers they hire account for three out of every 10 jobs in the U.S. These are the innovators and entrepreneurs, the job creators we hear so much about in election years such as this one.
Key drivers of our economic progress, the self-employed comprise approximately 10 percent of the nation’s workforce, for a total of 14.6 million people. In turn, the people who identify themselves as self-employed provide jobs for nearly 30 million other workers, according to a Pew Research Center analysis of data from the U.S. Census Bureau.
It’s a group that receives a lot of attention and praise from the government economists who are tasked with creating a sound fiscal policy, as well as the media and would-be politicians. Some even go so far as to say the self-employed are the embodiment of the American Ideal.
What is unfortunately the case for the self-employed is that they face a big dilemma when they are home shopping. A typical strategy among this group is to maximize every possible deduction throughout the year in an effort to reduce gross taxable income and minimize the taxes they pay, but this can make it difficult to obtain financing for a home.
In short, some of the most successful people don’t appear to make much money. This can be an obstacle for many lenders, and the result is that this group often ends up facing a variety of challenges as they seek to find loans with acceptable terms and conditions.
Being self-employed does not have to be a barrier to financing a home and securing a piece of the American dream. The No. 1 niche for one of the lenders I am working with is the self-employed and those who have been receiving a 1099 for more than two years. This lender has a comprehensive understanding of the issues confronting the self-employed and their ability to obtain financing.
There are always options, even in a situation where it isn’t possible to use a borrower’s tax returns to qualify for financing. To provide the self-employed with an additional avenue for qualification, this particular lender I’m working with created a bank statement program.
An aspect of this program is that borrowers with a credit score down to 500 are considered, and 100 percent of gift funds are allowed. Of course, there are always stipulations. As an example, down payments and closing costs should not come from the same account that is used for qualifying income, except for borrowers who are 100 percent owners of their businesses.
The bottom line is that it could definitely be within the realm of possibility to secure financing for a home if you are self-employed. An essential strategy for success is to choose a mortgage broker with experience lending to this type of borrower.
There are many other strategies that can be used to increase your chances for acquiring a loan if you are self-employed. Please see my article entitled, “Will Being Self-Employed Affect My Ability To Get A Loan?”
As a mortgage broker, it is my job to exercise a blend of sound judgment and conservative creativity on behalf of my clients. In the past this has meant working directly with accountants and tax advisers, basically doing whatever it takes to help people achieve their goals and facilitate increased levels of home ownership in our communities.
For a free consultation about your options, contact me and I’ll help you develop a strategy that is unique to your situation.
Patrick Stoy has 15 years of mortgage lending experience. Patrick is CEO of Wilmington-based Market Consulting Mortgage, which he started in 2005 with a mission to build lifelong customer relationships by providing real value. To learn more about Marketing Consulting Mortgage, visit www.macmtg.com. Patrick can be reached at [email protected] or 910-509-7105.