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Thread: Loan problems because the lender is asking too many questions

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    Default Loan problems because the lender is asking too many questions

    I am trying to qualify for a home loan and this lender has now asked the reason why I had declining income in 2013 and 2014. My main problem is he asked what the nature of my business is because I told him over the phone I was a photo editor that is self employed but on my taxes I have entertainer written down. He also wants a profit and loss statement which is expensive to get done. UGH what should I tell him?

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    Default Re: Loan problems because the lender is asking too many questions

    Find a new lender? By the time he does all this digging he might still reject you or give you a high interest rate. So can you not see what other options are out there?
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    Default Re: Loan problems because the lender is asking too many questions

    Quote Originally Posted by miss.a.p1600 View Post
    Find a new lender? By the time he does all this digging he might still reject you or give you a high interest rate. So can you not see what other options are out there?
    How should I approach the new lender? Should I say I am an entertainer or stick with photo editor story? And if they ask the nature of my business what should I say?

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    Default Re: Loan problems because the lender is asking too many questions

    That's an interesting question maybe the other ladies can chime in.

    Here's what I found on the web about criteria for getting accepted for a home loan.

    http://enlightenme.com/home-loan-qualify-mortgage/

    I think the fact you had declining income raised some warning flags for the lender so then they start asking more questions to see if they should lend to you. Maybe if your income was on an upward rise they wouldn't digging as much.
    “Cook for him like a housewife, fuck him good like a nympho….pay the rent and the car note, he invests in me like crypto”

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    Default Re: Loan problems because the lender is asking too many questions

    Quote Originally Posted by indiegirl View Post
    How should I approach the new lender? Should I say I am an entertainer or stick with photo editor story? And if they ask the nature of my business what should I say?
    I think you should tell the truth. It might be considered fraud if you give false information.

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    Default Re: Loan problems because the lender is asking too many questions

    Quote Originally Posted by indiegirl View Post
    I am trying to qualify for a home loan and this lender has now asked the reason why I had declining income in 2013 and 2014. My main problem is he asked what the nature of my business is because I told him over the phone I was a photo editor that is self employed but on my taxes I have entertainer written down. He also wants a profit and loss statement which is expensive to get done. UGH what should I tell him?
    The Schedule C you attached to your tax returns is an income statement. You can re-write it or transpose the numbers from your Schedule C to the bank's preferred form if they want. But, don't change the numbers. If you had an income decline in 2014 and 2013, explain why. For example, you worked fewer shifts. Simply tell the truth. If you have income numbers from prior years, put them together with numbers from this year on a spread sheet to show an overall trend. Excel will do graphs and trend lines. It's great for showing where you are going. Of course, if the trend is down, the bank is going to further discount your income. What they are looking for (corporate apartments too) is your debt payment to income ratio. They won't lend (or rent) if your payment is over 31% of your pre-tax income. If you are self-employed, they do discount your income because they know that self-employed people tend to have income swings. The more volatile the income, the bigger the discount. You have a couple of choices if your income trend is down. One, is a bigger down payment to bring the monthly payment to less than 31%. (This includes insurance, taxes, principal and interest.) Or, you can look at a less expensive house if your down payment is fixed. Your other option is to increase your income by adding a co-borrower.

    HTH
    Z

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    Default Re: Loan problems because the lender is asking too many questions

    Consider buying quickbooks to do your books with, fairly cheap[you can even buy an old copy on ebay] and it creates perfect reports on the fly. For the here and now, Zofia is exactly right, put your Sched C in a cuter format and call it a day. Try to remain consistent in what you tell bankers, they don't really care what you do but do want to believe you are honest...tell them a story that matches what your last three years of taxes say.

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    Default Re: Loan problems because the lender is asking too many questions

    I always write entertainment on tax forms in the unfortunate case I ever get audited. I have been approved with 3 lenders before but I could not find a house in my loan price range in my home state so I've been trying a lender and moving to a new state. I guess we'll see how this goes! I'll stick with telling the new lender adult entertainment if they ask for details. I dropped the other lender. Kinda embarrassed to say it lol. Thanks guys .

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    Default Re: Loan problems because the lender is asking too many questions

    Did you mention to the new lender that you were approved by 3 lenders in another state? I'd tell them that and assume they could easily approve also?
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    Default Re: Loan problems because the lender is asking too many questions

    A drop in income is a red flag for mortgage companies. All they need is a brief explanation, such as illness, new baby/ maternity leave, a return to school etc. If your income is back to previous levels, bank statements with deposits highlighted should work.

    Don't worry about what your job title is, just put down "entertainer." The local church isn't underwriting your loan, and your loan officer wants to earn her commission as much, if not more than you want to get that loan. Unless she's just an asshole, your loan officer doesn't really care where your legal and taxable income is coming from.

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    Default Re: Loan problems because the lender is asking too many questions

    Quote Originally Posted by Tourdefranzia View Post
    A drop in income is a red flag for mortgage companies. All they need is a brief explanation, such as illness, new baby/ maternity leave, a return to school etc. If your income is back to previous levels, bank statements with deposits highlighted should work.
    You will need income statements. No underwriter is going to dig through bank statements and deposits. If your Schedule C does not reflect a turn around in income, they will project it as perpetually declining. Then, they will look out several years to see if your declining income still supports your mortgage payment. They are looking for no more than 31% of income being committed to the mortgage, taxes, insurance and HOA dues. If you don't meet the ratio, they will not approve you, that simple.

    Good luck,
    Z

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    Default Re: Loan problems because the lender is asking too many questions

    Indie Girl, what state are you in? Also, what type of loan are you applying for (FHA, Conventional etc.). I am asking because I may be able to help you. Ill PM you if I think I can...

    The lender is not asking you too many questions, be prepared if you move forward with this transaction to have to submit a lot of documentation. They do not want to see declining income; however you could always file your 2015 taxes early and show you made more. Also, your front end debt ratio (meaning PIMI) should not go over 31 percent but can with compensating factors- they actually look at your back end debt ratio, which is housing + all other monthly obligations and this can go as high as 50% on certain loan products. Also a P and L is not very expensive. Please be aware you are also going to have to pay for an inspection, appraisal, possibly a survey (before hand) as well as a full year of HOI prior to closing, so the P and L is nothing compared to those things.
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