Self-Employed Buyers - How to Get Them to the Closing Table

Self-Employed Buyers

With self-employed buyers, the challenge is real. They usually have great income, but they love to take as many write-offs as possible (and I don’t blame them, I do the same). But when it comes time to approve them for a loan, their tax returns don’t show a lot of income. This is a problem, but we may be able to help.


Tom and Nancy are buying a home. They’ve been self-employed for five years, great credit, 20% down payment, and great reserves. Using income on tax returns, we end up with 70% debt-to-income ratio, way too high for a conventional loan (usually needs to be below 45%).

We have a couple loan products that can get them approved!

Bank Statement Loans

Self Employed BuyersWith self-employed, independent contractors, or cash business buyers, the challenge is that they may make good money, but on paper (tax returns), after write-offs, their income is minimal. But we have two ways we can help.

Bank Statement Loans are specifically designed to help these buyers. With this loan product, we don’t use tax returns to qualify income, we use 12 or 24 months of bank statements.

 Essentially, we look at how much money is coming in (by looking at line items on their bank statements) and most lenders don’t look at bank statements for expenses, they just use an expense factor between 15% and 60% depending on what type of business and whether it’s home based or not and use those numbers to get a monthly income that we can use to qualify them for a loan. 

It’s a great loan product and we’ve had great success helping self-employed and independent contractors get into the home of their dreams.

Asset Depletion Loan

Other ways we can qualify them are to look at reserves, investments, assets, and retirement accounts. It’s called asset depletion.

Here’s an example. Let’s say that Tom and Nancy need an additional $1,000 of monthly income to qualify for their mortgage. They have $100,000 in a mutual fund that they can easily access. With one of our lenders (we work with over 100 lenders ), we need to show 5 years of additional income in their bank account.

So $1,000 x 60 months = $60,000, which they do have. So this lender will allow us to add $1,000 of income to the loan application, and that will put us over the top. 

Tom and Nancy can close on their new home.

Scenario HotlineScenario Hotline

Do you have a question about qualifying your buyer for a mortgage? Help is just a phone call away. Just call us, and either Sam or I will answer, and if we don’t have an answer, we will find one for you.

Or feel free to give the number to your buyer and have them call direct.

Call or text: 562-576-6885

We Help You Close More Loans

We take our Realtor partnerships seriously. We both have run real estate offices, and although we concentrate on loans right now, we use the over 30 years of combined experience to help our Realtor partners get more business and close more loans.

Here are just some of the ways we help our partner agents:

  • Lower rates because of our low overhead. We are a small Mortgage Brokerage and don’t need to charge high rates, like many national and regional banks and lenders do.
  • As Mortgage Brokers, we have access to dozens of wholesale lenders, each with their own specialties and strengths. We are able to shop for the best loan product and best rate. In fact, lenders compete for our business!
  • We can help you create a business plan, and show you ways to reach your financial and business goals for the year. If you don’t have a business plan, you don’t have a business, you have a hobby.
  • We are marketing experts, and can show you how to get more business using organic and paid methods. We use the business plan to identify 3 or 4 avenues of marketing, and create a plan of action to implement and reach your goals.
  • We pick up the phone! Even on weekends and evenings. And if we can’t pick up, we get back to you right away. If you’ve been in this business long enough, you know how frustrating it can be when you can’t reach your lender!
 We would love a chance to earn your business. Give us a call and see if we can help you close more deals!
Jesse Rivera - Mortgage Broker
Jesse Rivera
Mortgage Broker
Prospect Lending
NMLS #1537416
Sam Musallam - Mortgage Broker
Sam Musallam
Mortgage Broker
Prospect Lending
NMLS #1173805

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