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Help! I am self-employed and the bank declined my home loan. What can I do?

Updated: Jun 3, 2019

So, you are self-employed; you make good money; you know you can afford the payment for the home you want to buy. You’re excited to buy your new home, but the bank turns you down. They say, “Your DTI is too high”.

What does that mean? More importantly, what can you do to fix the problem?

I met a woman who owned a successful law firm with her husband. They are Chase Private Banking clients. They applied for a refinance of their home loan with Chase; and they were turned down. The reason given was “Your DTI is too high”. I got the loan approved (with Chase, by the way) simply by proving the business account paid for the cars.

I was inspired to write this series of articles because I want to help you understand enough about banking to greatly improve your chances of gaining loan approval when you want to buy or refinance your home or investment property.

If you work with a mortgage broker or mortgage banker, it is like working with an attorney who prepares her client well for court. If you go to court without an attorney, you may win. However, you increase your chances of winning if you work with an attorney who knows the law and advises you well.

This series of articles will address these issues and more:

  • Did you know that if your business account consistently pays car and credit card payments, and you can prove that for the last 12 months, most lenders will not count that debt in the DTI calculation?

  • Did you know that if you own an S-Corp. or Partnership and your accountant does not do a balance sheet and report distributions on your business tax return, most lenders will not use the income from that entity to qualify you for your home loan?

  • If you are a sole proprietor and claim “business use of home” as a deduction, lenders will add that back to your income

  • If you have rental properties and the income calculated by lenders is negative, they do not deduct that amount from your income. Worse! They count it as debt. I will explain how that affects you, and what you can do about it.

Lenders consider you self-employed if you own 25% or more of any business entity (i.e. a corporation, partnership or sole-proprietorship). This series of articles will show you enough about the how lenders calculate self-employed borrower’s income documentation to help you plan for success. I will help you strategically plan for loan approval.

There are many choices self-employed people make with their tax professionals when they file tax returns. I will show you what will happen in underwriting when you apply for a home loan, so that the choices you make will benefit you when you want to buy or refinance your home or investment property.

This series of articles will offer you simple tips and solutions to the issues faced by self-employed people. Another series of articles helps people who are divorced or planning a divorce.

If you have questions or want help assessing your situation, you can contact me at 877-728-2008;

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