Jumbo Loans For Self Employed Borrowers With Low Credit Scores

This BLOG On Jumbo Loans For Self Employed Borrowers Was UPDATED On July 8, 2017

  • NON-QM Loans and Bank Statement Mortgage Loans for self employed borrowers are back. Traditionally, Jumbo Loans are much tougher to qualify for than standard Conventional Loans. 
  • Jumbo Loans For Self Employed Borrowers with credit scores down to 600 FICO is now available to qualified borrowers.
  • Minimum down payment required is 20%.
  • With bank statement loans for self employed borrowers, lenders will average 24 months of deposits from their bank statement.
  • The 24 month average of deposits is used as monthly gross income.
  • Withdrawals from bank statements do not count.

How Lenders Qualify Self Employed Borrowers

Mortgage lenders require two years tax returns for mortgage qualification as well as W-2’s for mortgage loan borrowers to determine their assets, income, and liabilities.

  • Mortgage lenders rely on the W-2’s from the past two years plus the mortgage borrower’s current pay check stubs in determining monthly gross income when qualifying for traditional mortgage loan. 
  • With self employed borrowers mortgage lenders will need to rely the borrower’s monthly income from the borrowers tax returns. 
  • Most self employed borrowers have issues with income qualification due to write offs on tax returns.

Tax Returns Of Self Employed Borrowers

The way mortgage lenders determine income for those who do not have W-2’s and are self employed or is by averaging the adjusted gross income from the past two years income tax returns.

  • Depreciation can be added as additional income. 
  • If the adjusted income for the past two years is the same or the most recent year adjusted gross income is increasing, then the two years tax returns adjusted gross income is averaged.
  • If the most current year adjusted income from tax returns is significantly less, then the lender will just use the lower adjusted gross income and average that by 12 months or one year.
  • This income calculation for self employed borrowers became a common issue.
  • Bank Statement Mortgage Loans for Self Employed borrowers now make qualifying for a Jumbo Loan possible.

Tax Extensions

Many self employed or business owners file tax extensions.

  • So what happens if a borrower filed a tax extension for 2016 and want to purchase a home and needs a mortgage. 
  • The mortgage lender will need a copy of the 2016 tax extension and need 2014 and 2015 tax returns.

Underwriters Average Two Years Tax Returns For Mortgage Qualification

What happens if the mortgage loan borrower needs higher income and needs to file 2016 tax returns that has currently has a tax extension?

  • A mortgage loan borrower can file tax returns for 2016 which has an extension and use the average of the 2015 and 2016 tax returns for mortgage qualification but the mortgage lender needs to verify that the tax returns have been filed via IRS form 4056
  • It normally takes 6 to 8 weeks to be able to verify that from the IRS. 
  • If you are in this situation, contact us at 1-800-900-8569 or email us at gcho@gustancho.com.
  • Depending on the lender, a CPA letter can be sufficient or borrowers may have to go to local or regional IRS office and get tax returns stamped by an IRS official.
  • The  mortgage lender might also require to provide a copy of the cancelled check that was submitted with 2016 IRS tax returns.

Amending Tax Returns For Mortgage Qualification

What happens if I amend my tax returns for mortgage qualification?

  • This is a common practice with many self employed and business owners who have declared very little income and want to amend their tax returns for mortgage qualification. 
  • Anyone can amend their income for mortgage qualification but needs to be legitimate. 
  • Borrowers who want to write less off and get the advise from CPA.
  • Tax payers can declare more income on tax returns for mortgage qualification.
  • Tax payers can do that and pay more taxes. 
  • However, there is a six month waiting period after a tax return has been recently amended for a mortgage lender to take tax returns for mortgage qualification.
  • What if I amend my tax returns after I get the mortgage? 
  • Tax payers who amend tax returns after they have closed on home loan to reflect less income, there could be red flags raised. 
  • Tax payers who solely amended tax returns for the purpose of just obtaining a mortgage loan, it could possibly be considered mortgage fraud if not done the right way. 
  • Seek the advice of tax attorney or CPA.
  • However, if it was due to an honest mistake that can be documented and was legal, than there should not be a problem. 
  • I am not an accountant nor tax attorney so I recommend you seek the advise of a tax professional. 
  • I do want to warn folks that it is not worth amending tax returns for mortgage qualification if the figures are not correct and are planning on re-amending them again after closing mortgage loan.

Self employed borrowers who need more information on Jumbo Loans For Self Employed Borrowers, please contact us at 1-800-900-8569 or email us at gcho@gustancho.com.

Related> Amending Tax Returns to Qualfy for Mortgage

Related> Self Employed Borrowers

Related> Borrowers who are Self Employed

The information contained on Gustan Cho Associates website is for informational purposes only and is not an advertisement for products offered by The Gustan Cho Team @ Gustan Cho Associates or its affiliates. The views and opinions expressed herein are those of the author and/or guest writers of Gustan Cho Associates Mortgage & Real Estate Information Resource Center website and do not reflect the policy of Gustan Cho Associates Lenders Network, its officers, subsidiaries, parent, or affiliates.

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