Mortgages for Dummies
Martin A. Charney B.Comm
If you’re self-employed, you still have a choice?
Are you using 2018, 2019 OR 2020 taxable income to prove your income for a mortgage?
Because 2018 and 2019 were generally good for many business people, you may qualify higher today.
But very soon, the huge challenge will arise.
If you use 2019 and 2020 income, because Covid has reduced many business owners’ 2020 incomes, qualifying personal income will drop drastically for many.
Lenders’ Law:
If the last year was higher than the previous year, the law is to take the average.
But if the last year was lower, because lenders are conservative, they take the lower year as the stated income.
So, if 2020 was lower than 2019, we can’t average 2019 and 2020 income in 2021 and will have to use the lower 2020 pandemic income.
That’s not a good thing!
2021 may also end up being a challenging year for self-employed purchasers because we will have to average the ugly 2020 income with 2021 income, but let’s hope ’22 is higher than ’21.
With this in mind, I recommend that self-employed home buyers try to buy sooner rather than later.
Before being expected to file ‘20’ taxes, take advantage of 2 good years (i.e. ‘18 and ‘19) while still possible!
I have been in the mortgage industry for many years, so my expertise will be very valuable.
I appreciate the opportunity to help purchasers and Realtors close many more transactions.
p.s. If we can’t prequalify buyers, we may use our rent to own Home to Own (H20) Program as an alternative.
Be more prosperous.