Self-Employed Mortgage Approval

SELF-EMPLOYED MORTGAGE APPROVAL IN CHICAGOLAND Self-employed buyers can absolutely qualify for a mortgage.

The process is different because the lender cannot verify income with only a pay stub and a W-2. The lender reviews the business, tax returns, ownership structure, and income history.

WHO IS CONSIDERED SELF-EMPLOYED?

REVENUE IS NOT QUALIFYING INCOME.

You are generally treated as self-employed when you are:

A business can receive $500,000 in annual revenue, but that does not mean the borrower earns $500,000 of qualifying income.

An independent contractor Paid primarily through 1099s A consultant A real estate professional A tradesperson or contractor A restaurant or retail owner A doctor, dentist, attorney, or accountant with business ownership An owner of an LLC, partnership, or corporation A borrower with at least 25% ownership in a business is generally treated as self-employed for mortgage qualification.

The lender subtracts the applicable business expenses and analyzes the income reported on the tax returns.

This is one of the biggest surprises for selfemployed buyers.

A business can have strong deposits and cash flow while the tax returns show much lower qualifying income after deductions.

BUSINESS DEDUCTIONS Business deductions reduce taxable income and can lower the owner’s tax bill.

They can also reduce the income available for traditional mortgage qualification.

Certain noncash expenses, such as allowable depreciation, can be added back during the mortgage analysis.

Ordinary operating expenses cannot simply be ignored.

Have the income reviewed before making offers or deciding on a target purchase price.

The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above. Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice please consult an appropriate professional in one of these fields.

Self-Employed Mortgage Approval in Chicagoland

YOUR BUSINESS STRUCTURE CONTROLS THE DOCUMENTS The lender requires different documents based on whether you operate as a: Sole proprietor LLC Partnership S corporation C corporation Documents can include: Personal tax returns Business tax returns 1099s Schedule K-1s

Business bank statements Profit-and-loss statement Balance sheet Business license or third-party business verification

Not every file requires every document.

A current profit-and-loss statement is requested when the lender needs to confirm year-to-date earnings, business stability, or continuation of income.

INCOME TRENDS MATTER The lender compares income from year to year.

Stable or increasing income provides the strongest qualification.

Declining income requires additional analysis and may reduce the amount available for use. A strong current year does not automatically erase a weaker prior year when the newer income has not yet been reported on a filed tax return.

USING BUSINESS FUNDS Many Chicagoland business owners keep most of their available money in a business account.

Business funds can be used for the down payment, closing costs, or reserves when the funds are properly documented and withdrawing them does not harm the business.

The lender reviews business cash flow, available balances, ongoing expenses, and the company’s financial condition.

Do not transfer large amounts from a business account before discussing the transaction with the lender.

The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above. Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice please consult an appropriate professional in one of these fields.

Self-Employed Mortgage Approval in Chicagoland

BANK-STATEMENT LOAN OPTIONS Some self-employed borrowers show strong deposits and real cash flow but do not qualify for the desired loan amount using tax returns.

A bank-statement loan offers an alternative.

These programs review deposits over a set period and apply an expense factor to estimate qualifying income.

Bank-statement programs commonly require: A larger down payment More cash reserves A higher interest rate Additional business documentation

REVENUE IS NOT QUALIFYING COORDINATE TAX AND MORTGAGE PLANNING. Your accountant’s job is often to reduce taxable income legally.

Your lender’s job is to document enough stable income to support the mortgage.

Those goals can conflict.

A self-employed buyer planning to purchase within the next year should speak with both professionals before filing the next tax return.

The lender cannot give tax advice, and the accountant does not always know how each deduction affects mortgage qualification.

They are not automatically better than conventional financing. They provide another option when tax-return income does not reflect the borrower’s actual cash flow.

BOTTOM LINE Self-employed approval works best when the review starts early.

Before shopping, understand: How much qualifying income the lender can use Which tax returns and business documents are required Whether business funds can be used Whether income is stable, increasing, or declining Whether traditional or alternative financing fits better The business does not have to be simple. The income needs to be clearly documented and matched with the right mortgage strategy.

JIM BOSTON

Loan Officer | NMLS 443246

C: (847) 571-3150 | jboston@uhm.com 1018 W Madison | Suite #6 | Chicago, IL 60607

The information provided here is for informational purposes. When interest rates and loan program information are included, it is for illustration purposes only and not a solicitation or quote for services. This is not an advertisement or loan estimate. Current interest rates, loan programs and qualification criteria can change at any time. If you have questions or need assistance, we can be reached using the contact information above. Union Home Mortgage Corp. does not provide tax, legal, credit repair, or accounting services. The information provided is generally true but may not apply to you or your situation. For tax or legal advice please consult an appropriate professional in one of these fields.