This ARTICLE On Self-Employed Relocation Mortgage Guidelines And Challenges Was PUBLISHED On September 10th, 2019
There are three different types of residential mortgages:
Primary Home Mortgages are the best and first choice for borrowers.
- The main reason why primary home mortgages are so popular is because they have lower mortgage rates than second home and investment property rates
- Primary owner-occupant home loans require smaller down payment than second homes and investment property mortgages
In this article, we will cover and discuss Self-Employed Relocation Mortgage Guidelines.
Self-Employed Relocation Mortgage Guidelines For Home Buyers
Second home and investment property mortgages do not have a distance requirement from work to place of residence.
- However, lenders want to know how far a homeowner will live to their place of work when it comes to owner-occupant mortgages
- The main reason owner-occupant mortgages are considered less risk by lenders
- The reasoning behind this is because a property owner will less likely to bail on their owner-occupant home loan versus second home and investment home loans
Due to the lesser risk-factors, owner-occupant mortgages have lower rates and lower down payment requirement than other types of loan programs.
Mortgage Guidelines For Self-Employed Borrowers
Gustan Cho Associates offers government, conventional, and Non-QM Loans for self-employed borrowers.
- Bank statement loans for self-employed borrowers are becoming increasingly popular
- There is no income tax returns required
- We go off by averaging bank statement deposits for the past 12 months
- That average is used as the qualifying monthly income
- These are quick and easy loans
- Most bank statement loans for self-employed borrowers are closed within 30 days from the time the borrowers submit all documents and the loan estimate is disclosed
However, Self-Employed Relocation Mortgage Loans can be complicated and needs to make sense.
How Lenders Underwrite Self-Employed Relocation Mortgage Loans
Self-Employed Relocation Mortgage Loans need to make sense to the mortgage underwriter.
- Self-employed wage-earners and business owners will face challenges when it comes to qualify for Self-Employed Relocation Mortgage Loans
- For a business owner to relocate their business to a new location and/or area is an added risk layer for the mortgage lender
- For example, if a restaurant owner has been operating his restaurant for many years in Chicago but now wants to move his business to Tampa, Florida, this will be an issue
- The issue lenders will be concerned about is the business owner has no history of operating a restaurant in Tampa
- The business is brand new to Tampa with no history of operations
- The mortgage underwriter will need to feel confident that the business owner will have the same success in Tampa as he did in Chicago
If the business is a national franchise, then it is feasable.
If a self-employed borrower has an online business, this will create no problem when the borrower relocates to a different state.
- This holds especially true when management is already in place to run the online business
- Remote positions are becoming increasingly popular
- This holds true with online businesses
- Many companies offer remote career positions where employees are not required to report to a brick and mortar location
Companies may require employees and/or vendors to report to the main office once or twice a year.
Freelance Wage Earners Employed As Independent Contractors
Freelance wage earners are normally self-employed 1099 independent contractors.
- Some freelance wage earners get paid under their personal name
- Others create an LLC, partnership, or corporation and make their income that way
- Freelance wage earners can work for multiple companies and/or vendors
Alex Carlucci is a Senior Vice President at Gustan Cho Associates and a self-employed borrower expert.
Alex says the following:
As a freelance, self-employed buyer, expect to provide the two most recent federal tax returns. Most mortgage programs will average the income and depending on the numbers, and there are many ways to calculate the income. An experienced mortgage professional can dig deep into guidelines and the tax return to find extra allowed income. Trust us; this could make all the difference. Typically, average income over the last two years. Income must be the same or increasing. A slight drop in income may be acceptable. Possible approval with only one year of tax returns. Do not figure the income yourself. Notice the last two on the list. Yes, approval with one year income tax returns is possible! Although, it is challenging to obtain loan approval with just one year in business. Strong credit, low debt to income ratios, and other factors may help buyers receive approval with only one year of income verification. These factors could also help in the case of a previous low year. One of the best self-employed income tips is not to figure income as a borrower. It is not the gross and is not always the net. Depending on the income type, deductions, and situations, there are many possible additions and deductions within the income calculation. Then, each mortgage program treats certain income areas differently. Thus, the best course of action is to provide complete documentation and answer the lender questions, and let the experienced professional do the math plus apply the guidelines.
Qualifying For A Mortgage For Self-Employed Borrowers With A Direct Lender With No Overlays
The team at Gustan Cho Associates are experts in originating and funding self-employed mortgage loans. We are experts in structuring self-employed borrowers relocating to other states. Many residents of high-tax states are fleeing to states like Tennessee, Ohio, Kentucky, Mississippi, Colorado, Florida, Texas, Georgia, Indiana, Michigan. For more information about this article, feel free to contact us at Gustan Cho Associates at 262-716-8151 or text us for faster response. Or email us at email@example.com.