I recently closed a transaction for a nice couple who buying a home in Edmonds. They had been working with a large bank for almost a month and they were not able to provide loan approval. My clients forwarded me their loan package from this bank and it was amazing to see what a poor job they did completing the loan application. So much information was missing or miscalculated with their incomes. After reading this article in the Seattle PI stating that 25% of loan applications taken by large lenders were declined, I have to wonder how many of those applicants are self-employed borrowers in the same boat as my clients? I would also love to know the experience levels of the mortgage originators who were ap-takers trying to originator those declined loans. I'm coming to the conclusion that many mortgage originators, processors and underwriters heavily relied on stated income loans for self-employed borrowers because they were easier to process.
Determining income of self-employed borrowers is not as easy as someone who has a fixed annual salary; but it doesn't have to be that hard! Stated income or low doc loans, which were created for this type of scenario, are gone. There is more documentation required, including a minimum of two years tax returns (business and personal) with all schedules. Lenders are looking for trends that your business and income are steady or improving. Be prepared to provide plenty of documentation.
If you work with a mortgage professional who is experienced with reading tax returns, you're going to have much better results. I think it also helps to work with someone who has underwriters on location. It seems like many of the larger institutions have pooled processing and underwriting that is often not located at the mortgage originators location. If exceptions are needed, it's not unusual to find management (if not the processors or underwriters) located out of the area.
As a Correspondent Lender, our processing and underwriting are done under one roof at our main office in Kent. I've worked with our lead underwriter for over eleven years at Mortgage Master Service Corporation. If you're self employed, I'd love to help you with your next mortgage for your home located anywhere in Washington.