We have showcased the homes of many creative employees in our feature stories- painters, photographers, web developers, bakers, etc- all entrepreneurs with so much talent and creativity. We love the creative community here in Phoenix and feel the city has really begun to have a unique voice because of the ideas, products and vision of local entrepreneurs. In speaking with the creative employees we have featured here, the common stress and frustrations typically surround finances- and specifically wanting to qualify for a home loan or proving your worth to a bank.
So how do you qualify for a loan as a “creative employee?” If you don’t receive a paycheck every two weeks, a W2 at the end of the year, a salary with bonus structure etc, what do you do? What do you show? How do you start? We spoke with a trusted lender, Lynn Gallett of Guaranteed Rate Affinity, to break down this complex questions into a simple to understand and absolutely do-able list…
N: Can you share with us what types of loan programs there are out there to help self employed people buy homes?
L: “First, don’t let being self-employed or creatively employed deter you from exploring the possibility of owning your own home. There are loan programs designed around the needs of self-employed borrowers, featuring common-sense underwriting that considers their unique income documentation challenges.”
One such loan program is called a Bank Statement Loan:
Bank Statement Loans
12 and 24-Month Bank Statement Program Features:
• Profit and Loss Statements NOT required
• Loan amounts as high as $3,000,000
• Up to 90% loan-to-value with no mortgage insurance, depending on the loan size and purpose
• Multiple business accounts permitted
• Business bank statements and personal bank statements permitted
• Business expense ratio as low as 10%
• Borrower does not have to be 100% owner of the business
N: So what do buyers need to get together to give to a lender?
L: If you’re looking to do a bank statement loan, you will need 12-24 months of bank statements which can be your personal, business or a combination of the two- and you don’t need to be the 100% owner of the business. That’s a good jumping off point, then we can explore what else you may need once we take a look at those.
N: What about a typical conventional loan? What would a self employed person need to bring to you to qualify?
L: Two years of tax returns to include both business and personal returns. If the person has been employed for 5 years in their line of work, then we might be able to use just one year of tax returns. In some cases I may need profit and loss statements as well- but not all cases.
N: Which of the two is least expensive for the borrower?
L: Typically the conventional loan is the cheaper option- but every situation and business is unique.
The best thing you can do, if you’re considering purchasing a home in the next year, is to speak with a lender about your options and what you will need to get qualified. You are never obligated to work with someone and you don’t have to officially fill out an application until you are ready to do so. If you are looking for a lender to speak with, please reach out to Lynn Gallett or email us at hello@theneighborlyphx.com and we can send you a list of lenders we have worked with in the past that have been wonderful to our creative clients.