The Benefits of Using a Private Lender for a Self Employment Home Loan

 If you are self-employed, it can be tricky to qualify for a home loan due to debt to income ratios and business losses. Using a private lender can make the process easier and has many other benefits when it comes to qualifying for a self employment home loan.

For many Americans, owning their own business is a dream come true. If you are self-employed you enjoy many benefits both financial and otherwise. Most likely you are able to set your own schedule and you answer to yourself. You can work from home or whatever environment you may choose. You can set your own dress code and hours and take time off when you need it. You can also take advantage of many tax deductions to write off most of your business expenses. Everything from large equipment purchases to pens for you home office can be tax deductible which can help you save big come April.

While you may enjoy your tax savings most of the time, it can be a double edged sword, especially when it comes to qualifying for a home loan. Many times, people who are self-employed have tax returns that do not accurately reflect their actual income due to deductions. Sometimes it can even make it look like you lost money when you in fact had a good year. Throw in any debt you may have for business or personal purchases and your debt to income ratio can make you look like a huge liability to a bank.

For these reasons, many business owners find it difficult to secure a traditional mortgage from a bank. However, there are many other options to find a self employment home loan that will work for you. One key to finding a loan is to think outside of the traditional bank or mortgage broker and find a private lender like Level 4 Funding to finance your loan.

Pros and Cons of Using a Private Lender for Your Self Employment Home Loan

For many business owners, a private lender is their best chance of securing a self employment home loan. However, like any major financial decision, there are pros and cons that need to be carefully considered before making a decision.

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Pro: A private lender often has a very short approval process. Banks and public lenders can take anywhere from 30 to 45 days (and sometimes more) to approve and fund a loan. If you need a quick loan to buy a property, this can be too long. Also, when it comes to a self employment home loan, traditional banks will likely have issues during underwriting and come back to you several times asking for more paper work, more proof of income, more documentation. A private lender can have you funds in as little as 1-2 weeks with significantly less paperwork.

·       Con: Private loans are usually more of a risk for the lender. As such, you can expect to pay a higher interest rate for the loan.

·       Pro: Easy to qualify. A private mortgage lender has more flexibility than a bank in terms of who they lend money to. Borrowers who have bad credit, a high debt to income ratio, or are looking for a self employment home loan will have an easier time qualifying with a private lender than with a bank.

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      Pro: Geared towards investments and investment properties. If you are self employed, you know the benefit of having your money work for you to make more money. Private lenders have short term loans that are geared towards investment properties and fix and flip houses.

Once you evaluate the pros and cons, it is easy to see that in many cases, a private lender is the best option for your self employment home loan. Like all brokers, private lenders have to be licensed and they do have guidelines to follow to protect you and your investment. As long as you know that you will be able to make your monthly payments there is relatively low risk and a high reward for the self employed borrower.

Once you are ready to risk less with the best private lender, call us at Level 4 Funding to start your loan process today.

Stop waiting for a bank to give you the home loan you need. Take matters into your own hands and make your dreams come true today!

Dennis Dahlberg
Broker/RI/CEO/MLO

Level 4 Funding LLC
Arizona Tel:  (623) 582-4444 
Texas Tel:     (512) 516-1177 
www.Level4Funding.com

NMLS 1057378 | AZMB 0923961 | MLO 1057378
23335 N 18th Drive Suite 120
Phoenix AZ 85027

Stated Income Mortgage in Arizona

A stated income mortgage can be a helpful tool in qualifying for a mortgage if you are self-employed or have income that is difficult to verify. Learn what a stated income mortgage is and see if one is a good fit for your home loan needs.

In a traditional mortgage qualification process, the borrower is asked to provide a variety of documentation. Key among these documents are income verification documents. These include W-2s, tax returns for two years, pay stubs, and bank statements. Any additional deposits into a bank account that cannot be verified by paystubs must also be accounted for. Basically the financial assets of the borrower are gone over with a fine tooth comb. This system works well for people who hold traditional jobs with stable income. However, for borrowers who are self-employed, investors, or have a different non-traditional income situation, income verification can be almost impossible.

For borrowers who are unable to furnish proof of income, earn money in a non-traditional way, or who may have a higher than permissible debt to income ratio, a Arizona stated income mortgage can be a solution. A stated income mortgage is a home loan where the lender does not verify the borrower’s income via W-2’s or tax returns. The borrower is asked to state their income and then taken at their word.

Stated income mortgages have been given a bit of a bad reputation because they are easy to use to commit fraud. One less than flattering nickname for the loans is “liar’s loans.” This nickname came about because a study of IRS tax records found that in nearly 60% of all stated income mortgages the borrower actually made less than he/she declared as income to obtain the loan. Some politicians are trying to limit access to stated income loans based on the assertion that they could be used for fraudulent purposes.

When Does a Stated Income Mortgage Make Sense?

Despite its less than flattering nickname and somewhat checkered past, there are certain situations when a stated income mortgage is the best home loan option. For many borrowers this type of home loan is the only loan that will give them the capital they need to buy the home they can afford. There are a few situations where a stated income mortgage makes sense.

The first case in which a stated income mortgage is a smart choice is self-employment. This is actually the income situation that the mortgage type was designed for. For many small business owners, independent contractors, consultants, and other self-employed business people, it can be difficult to furnish proof of income to the bank’s satisfaction. Income sources may be considered unstable or there may simply not be a traditional W-2 or pay stub that can be provided. A stated income mortgage allows the business owner to state his/her income and qualify for a mortgage based on that statement.

Another case in which a stated income mortgage is a good option, is for someone who makes his or her living from investments. Take a real estate investor who owns multiple properties all with loans. Even if this investor makes $100,000 a year in disposable income and has the mortgage on each property covered by rent, his/her debt to income ratio might be too high on paper to be given an additional home loan. A stated income mortgage accounts for the actual disposable income this individual has to spend each month, rather than just what the financial situation looks like on paper.

A third situation that would benefit from a Arizona stated income mortgage would be in the case of a freelancer or consultant. People who are employed in these fields generally tend to work for more than one company. Their work is also often seasonal or may vary from month to month. During the mortgage qualification process, banks look at 2 months of pay stubs. If it is a slow month, the amount of pay may not reflect the actual amount that borrower earned and therefore he/she may not qualify for a high enough amount, if at all. In addition, banks require that a borrower works for a company for a year or more before that income source is considered valid. A freelancer or consultant often works for many different companies but only one or two on a permanent basis. Therefore the actual income of the borrower could be $200,000 but only $50,000 is counted as income by the bank. A stated income mortgage allows the borrower to use their actual income amount to qualify for a mortgage.

If you are in an employment situation where a stated income mortgage makes sense, find a broker to get started.

Most traditional banks do not offer Arizona stated income mortgages as they are considered higher risk loans. Brokerage firms and smaller banks often have programs that will work with borrowers who need a stated income mortgage.

Level 4 Funding LLC

Dennis Dahlberg, Broker/RI/CEO

NMLS 1058389 AZMB 0923961

23335 N 18^th Drive Suite 120

Phoenix AZ 85027

623-582-4444

www.Level4Funding.com