Business Owners: Avoid Potholes when Obtaining a Mortgage


MAY, 2017


As a Business Owner, income statements and personal distributions are most likely far from traditional.  The ebbs and flows experienced while growing a business in today’s market can result in extreme swings in income and personal cash flow.

For example, last year you may have claimed a loss to take advantage of tax breaks, while the year prior received a large year-end distribution. These scenarios often do not fit in the conventional lending box, funded by government approved agencies (FHA, Fannie Mae, Freddie Mac). While on paper your credit and assets may look like the ideal lender scenario in terms of risk and ability to repay, once the onion layers begin to peel back and verifications of employment and income history are required, it can be a showstopper.

Stated Income Loans, historically designed for self-employed borrowers, were so badly abused in the 2007/2008 housing crises, they were essentially eliminated by the Dodd-Frank legislation

It can also be a hurdle when trying to document and find consistency when calculating the debt-to-income (DTI) ratio with your mortgage lender. This DTI is the fundamental basis for qualifying you for your home loan.  Complicated tax returns, partnership agreements or corporate structure which may be subject to personal guarantees on business loans can add additional layers of risk.

“Lending institutions look closely for red flags in your income history. For example, income declining for 25% or more from the previous year could present a major red flag”

These compounding factors, coupled with the highly regulated and complex mortgage industry can make the home buying process complicated. Do not underestimate the value of a seasoned Lending Professional and financial expert who not only understands the unique financial posturing of today’s business owner, but are experienced with emerging loan programs which offer some flexibility in structure, rate and terms.

At American Liberty Mortgage we provide a high-touch approach to home financing and offer the best interest rates and self-employed programs available. Contact our seasoned experts at 407-233-4077, or visit our website for a quick quote today.

Quick Quote

Pin It on Pinterest

Share This