UnThreaded | Threaded | Whole Thread (36) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: holhealthprac Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 127696  
Subject: Debt-to-income ratio if self-employed Date: 2/11/2013 10:38 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 1
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.

And then I also have questions about how income is calculated. Do they use my Schedule C? I have a $2000 per year depreciation write-off from the original purchase of the business. Will that $2000 be considered part of my annual income for purposes of qualifying?

If I call my bank about refinancing, do I need to ask for someone who specializes in self-employed borrowers or is this routine stuff?

Should I be requesting something more creative than a standard refi? I'd like to pay as little as possible at closing and increase my monthly cash flow.

I'm also able to pay down the mortgage somewhat if that will allow me a better deal.

Thanks so much in advance for your help!
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (36) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

Useful Resources
Our Home Center has all you need to make buying and owning a home a great experience. Get or refinance a mortgage and much more!
Buying/Selling a Home FAQ

Mortgage Professor
Offsite resource for mortgage questions.
Pencils of Promise - Back to School Drive
"Pencils of Promise works with communities across the globe to build schools and create programs that provide education opportunities for children."
Post of the Day:
Value Hounds

Netflix Riles Investors
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement