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Thread: Home loan

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    Veteran Member Ava Adele's Avatar
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    Default Home loan

    Hi there,

    so yes I file my taxes, it starts at about 30 thousand a year but after all of my deductions, its about 10 thousand. I really want to buy a house. I have perfect credit, low debt, and deposit money. However I dont really have the bottom line numbers. Has anyone else had this problem? How do you fix it???

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    Default Re: Home loan

    I would like to buy a house as well, refer to my post "CPA in Tennessee" I got a lot of really great answers. I'm still in the process of researching, gathering information and educating myself as much as I can on the process of buying a house "self-employed". What price of homes did you have in mind? definitely as a self employed person you would need to put down 20-35 percent purchase of the home. You said that after deductions you make 10,000 a year that is considered low income I don't think that would be enough to qualify for a home loan, lenders are really tough on "self-employed" people and even tougher on self-employed people that are in an adult business. I would suggest that you make more money and claim less of the deductions. In the end being self-employed and claiming lots of deductions will get you no where fast when you are trying to purchase a home. You have to pay more in taxes.

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    Default Re: Home loan

    At that income level, the downpayment percentage is not the problem. The percentage you need to deal with is 28/35. 28 percent of income to principle interest, taxes and insurance, and 35 percent total indebtedness.

    If you bank at a local bank, not one of the multinationals, they will keep an eye on your cash flow nearly as much as income. They understand writeoffs[for instance if you claim mileage on an old car,it is not actual cash out of pocket]

    at twice your claimed income you are looking at maybe a 100k loan
    Last edited by oldster; 04-29-2014 at 07:51 AM.

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    Default Re: Home loan

    as a self employed person you would need to put down 20-35 percent purchase of the home. You said that after deductions you make 10,000 a year that is considered low income I don't think that would be enough to qualify for a home loan, lenders are really tough on "self-employed" people and even tougher on self-employed people that are in an adult business
    Indeed thanks to new financial regulations all 'self-employed' persons are now considered to present a 'high risk' situation for potential lenders. And if the lender discovers that the 'self-employment' income comes from a profession with a short window of peak earnings potential followed by a probable 'forced' retirement long before a mortgage loan is paid off, the 'risk factor' becomes even higher.

    Generally speaking, to seriously pursue mortgage financing in your situation ...

    - you need two years worth of past tax returns to show your level of 'self-employed' income is verified and repeatable

    - you need enough of a down payment to reassure the lender that a 'negative equity' situation is extremely unlikely ( i.e. min 20% plus closing costs )

    - as mentioned above, your prospective annual mortgage payments ( with property taxes and insurances included ) relative to your total reported income shouldn't exceed 28%

    Relative to a $10k reported annual income level, the 28% hurdle is going to kill any realistic chance of obtaining conventional mortgage financing. There are two avenues to address this. One is to simply keep saving money until you no longer need financing to purchase a home. Another is to increase your reported earnings level to the point where the 28% hurdle becomes realistic versus the home purchase price / annual mortgage payments.
    Last edited by Melonie; 04-29-2014 at 09:09 AM.

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