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URL:  http://boards.fool.com/i-am-self-employed-and-am-trying-to-figure-out-if-30604210.aspx

Subject:  Re: Debt-to-income ratio if self-employed Date:  3/24/2013  2:08 AM
Author:  kahunacfa Number:  124984 of 127236

I am self-employed and am trying to figure out if I could qualify to refinance my home. I have excellent credit (800+) and high enough annual income to qualify. I am not sure about how the debt-to-income ratio is determined for self-employed individuals. I've recently spoken to other self-employed individuals who have been turned down.

A little history. I bought my house in 2006 for $180,000. I had been self-employed for less than two years at that time, but I found a "creative" lender willing to work with me because I had excellent credit and cash assets. I put $60,000 down at the time and qualified for a 6.75% stated income loan. Equivalent houses in the area are currently selling for about $160,000 so I am not underwater. I currently owe $108,000 on the mortgage.

I have no debt other than the mortgage (no car loan, student loans, home equity loans, etc). However, I pay EVERYTHING by credit card in order to earn cash back. I pay them off every month by the due date, but my average balances look somewhat high. Someone told me that some lenders look at average credit card balances rather than minimum required payments when determining debt-to-income ratio. Is that true? Do I need to go cash only for a few months? Or do I need to pay down my balance every couple days to keep my revolving debt low? Will the balances in my business credit cards also be counted? Technically, they shouldn't be, since those are business expenses paid out of gross business income. ...
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Unfortunately, most bank & S&L lenders are IDIOTS when dealing with self-employed buyers. You need to find a savvy, Intelligent Mortgage Broker such as those who visit this board DDonhoff and/or Catherine Coy.

Kahuna, CFA
Venture Capital Founding
General Partner 2012
Kailua-Kona, HI 96745
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