How to get approved for a home loan self-employed? Are you an entrepreneur like me and are you having a hard time getting a home loan becuase they don’t understand your income because you don’t have pay stubs and a W2? Yeah, I’ve been there. I’m going to show you exactly how to get it done.
Let’s go. As a former mortgage employee and actually a former Vice President at JP Morgan Chase in the mortgage department, I can tell you that traditional mortgages can be quite daunting for a self-employed person.
A traditional mortgage really is not necessarily built for an entrepreneur or self-employed person. Just being very honest with you. Additionally, as someone that worked in the business for over 18 years, many of the people looking at the applications and reviewing the documents and the loan documents and the employment and income document for a loan are not familiar with looking at the loan documents for self-employed person or entrepreneur.
Many of the processors and underwriters that work in the mortgage field just do not necessarily see enough self-employed people or enough self-employed documentation to truly now how to look at it.
So, it’s a very daunting process for a self-employed person trying to explain their income, trying to document their income and trying to get approved for a loan. And I can tell you they are some serious things that people do that make it even harder for themselves.
Let me begin. The traditional mortgage process as you may know starts off with a 10-03 which is your application. It’s about a 5-page application that you use to apply for a mortgage loan. It’ll ask you everything from the loan, the type of loan, the terms, your social security, your birthday, the number of kids you have, the number of your education, your bank accounts, what’s in them, all of you debts.
It is a very, very long application. But in addition to a loan application, you are going to need to provide some documentation for your employment like where you work, how long you’ve worked there. You’re going to have to provide your income documents such as your pay stubs, your W2s or tax returns. And you’re going to have to provide your asset documentation.
In other words, your bank statements, your retirement accounts, and things like that. So, with the traditional mortgage, it is set up in a very specific way that is mostly built for people that are employed by others. But let me tell you how you navigate the process as a self-employed person. So, let me tell you about the different types of loans that exist. You have government loans, conventional loans, and non-QM loans.
The most popular loan and the most familiar loan that people know about is a conventional loan. This is your traditional Fannie Mae or Freddie Mac back loan. It is one where most people go to the banks. 97% or 80% or 85% LTV. Those are your typical loans.
Then you have government loans that are backed by the government such as FHA, Federal Housing Authority loans. VA loans which are for Veterans. USDA loans which are government loans for rural areas. And then you have a category of loans that is totally new and has only been out a few years. Those are non-QM loans. That stands for non-qualified mortgages.
Back in the day, they used to be called sub-prime loans. But the term sub-prime has a very negative connotation because many people around 2005, 2006, and in the early 2000s, many of those people should not have received a loan altogether.
These loans require you to show any assets, any income, any job. And so, in many cases, the people could not afford the houses at all. And that is why many of them went into foreclosure. But now, more recently, where all the regulations and the changes that have occurred in the mortgage industry, we now have something called Non-Qm loans which are very similar to sub-prime loans.
But I can tell you, they are more heavily regulated and there’s some great opportunities there for people that are self-employed. So, like I said, non-QM loans are bit new. And not every lender or bank will offer them.
Let me tell you first that I’m not just telling you some things that I looked up in Google or anything like that. Many of you guys know Noelle as a big real estate entrepreneur, mentor, and mom of 5. But I’m also a licensed real estate agent in 2 states and I’m also a licensed mortgage loan officer. Meaning I have my mortgage loan officer licensed. So, I studied this.
I have my license and I continued to do my continuing education. So, I’m telling you things from someone that is actually in the business. With non-QM loans, they have some awesome programs for entrepreneurs, If you’re an entrepreneur like me. They have something called bank statements programs that I’ve been taking advantage of.
It’s very similar to a full dock loan program with the traditional mortgage lender. So, instead of using your tax returns to qualify you for your loan, they will look at your last 12 months or 24 months worth of bank statements for you business or your personal account which everyone you want to show them.
And what they will use to qualify you is just the monthly deposits. So, they’ll add up the income for the deposits for all of the banks’ statements. Let’s just say for example we’re using a 12-month bank statement. They’ll gather from January through December. You’ll add up all of your deposits for each month and you average them.
Meaning, divide them by 12. And that is the income that they will use to qualify you. Now, I’m not sure about you, but I usually have way more money going in my bank account than I have going on my tax returns. So, this has become an awesome program for me to be able to qualify for loans that I wouldn’t otherwise be able to qualify for at a bank or using a conventional or government loan.
Additionally, with non-qm loans, you don’t have loan amount limits like you do with conventional or government loans. With the conventional loan, the max loan amount in most states is somewhere around 474,000. If you’re living in like Washington state or California, it may be a little bit higher.
Additionally, if you have a 2 or 3 or 4 unit they give you a little bit more there. With government loans, it’s around 450,000 as well. But with non-qm loans, they will lend a million or 2 million dollars. And so, for a self-employed person that has good bank statements, good deposits going into their bank account, and like I said, one year’s worth will get you…
You only have to put down like 10%. In many cases, this has allowed me to get way more house for myself than I would otherwise be able to qualify for. And I have a good low-interest-rate because I did show my income just not in a traditional way. Okay, and as a bonus, because you know Noelle just loves you so much, I have to tell you everything. Let me give you another super-secret way of how I get a lot more properties without having to go to any bank at all.
It’s a system that we call tops. Which stands for taking over payment systems. The true work in real estate would be considered “subject to”. I made an entire video teaching you on this. But in other words, let me break it down for you really quickly so you understand.
One of the ways that I’ve been able to acquire so many rental properties is by targeting people that were behind on their mortgage payment, okay? People that were in pre-foreclosure. I would reach out them, put out signs, put out letters “Hey, are you behind on your mortgage payment?
Hey, I help with foreclosures. Don’t let your home go on foreclosure.” And many of those people will call me being 2, 3, 4 months behind on their mortgage payment. So, in many cases, I was able to get those properties for just a past-due amount on the mortgage. Let me give you an example.
I literally had a lady that was 3 months behind on a mortgage. Let’s just round it out and say her mortgage payment was $1,500. She behind 3 months, so she gets a letter called a notice of default (NOD) in the mail. And it show that she had to give the bank like $5,233 and blah, blah cents or she was going to go into foreclosure. So, she calls me as a real estate investor and say, “Hey, I’m about to go into foreclosure, how can you help?”
I told her what we could do, how we could help her fix her credit, how I can take over those mortgage payments, give her some money to move out and I would turn her property into a rental property until she can get on her feet. And maybe she could buy the property back or she could sell it to me.
However, she wanted. Again, different people, you can give them different options. In most cases though, they’re happy to take the money, walk away and then get your credit fixed by you taking over their payments. And again, this is completely legal, completely ethical and you do close with a real title company.
Again, the concept in real estate is called “Subject to”. I’ve made a whole video and I’m teaching you all about it if you want to watch that video. But this is another great way for a self-employed person who doesn’t want to deal with banks, doesn’t want to deal with lenders, doesn’t want to have to show their credit report and income and all these other stuff on how you can start getting rental properties without ever having to do those things.
You can pick properties for pennies on a dollars. Pick properties that have equity in them already. And just start making money and get properties for just a few thousand dollars like Noelle does. So, I have created an entire training just for you which will teach you all about real estate investing, all about how I make money, and how you can do the exact same thing.
And the best part, it’s completely free. Check it out at Noelle’sfreetraining.com. Again, that’s Noellesfreetraining.com. I just want to make sure that you have all the tools, all of the resources and all of the knowledge that you need to be successful. This is Noelle, to your success.