Self employed borrowers face unique challenges in choosing financing options.  The professionals at First Equity can help.

What is a self employed borrower?

The mortgage industry considers a self employed borrower to be anyone who receives income other than W-2 or owns more than 25% of a business.

What challenges does a self employed borrower face and how can First Equity help?

There are three main factors in qualifying for a mortgage.  A self employed borrower may face a unique challenge in each of these areas.

Credit History

A strong positive credit history is important for self employed borrowers.  A self employed borrower does not have income that is as predictable as a wage earner.  Your past payment history is a good indicator of how you will make payments in the future.  First Equity can work with you to repair your credit history of necessary.

Documented Income versus Debts

Self employed borrowers typically write off more than a salaried borrower which can have the affect of reducing your qualifying income.  In addition you may have company debts on your personal credit report.  This may give the impression that you cannot afford a certain mortgage.  The professionals at First Equity understand accounting and can perform an analysis of your financial statements to maximize your qualifying income.

Documented Assets

Self employed borrowers may have assets in both business and personal accounts.  Some loan programs do not allow credit for business assets.  First Equity can examine your profile, and recommend the most cost effective loan program.

What is the best loan program for a self employed borrower?

First Equity recommends four types of loans for a self employed borrower depending on your financial and business situation.

Full Documentation

This program requires documentation of income and assets and offers the best interest rates.  You must have at least one year's tax return.

Stated Income

This program allows a borrower to state an income without documenting it at application.  Since this type of loan CAN require documentation of income later (in case of late payment or default), we rarely use it at First Equity.  This program requires two years in the same business.

No Ratio

This program does not require an income figure nor documentation.  Documentation of assets is required.  Interest rate is the same, or slightly higher than Full Documentation.  This program requires two years in the same business.

No Doc

This program does not require income, asset, or employment information or documentation.  This loan is made based on credit and down payment.  Interest rate is determined based upon credit score and down payment.

What does it cost?

After determining if the borrower can qualify for a loan program, the total cost must be considered.  There are four basic components:

Closing Costs

Fees and costs are incurred at closing.  Generally these costs are:

	Application Fee
	Appraisal
	Title Insurance
	Closing Fee
	Recording Charges
	Survey

Fees such as origination fees and points may be negotiable.

Prepaid Items

These are fees and charges that are paid at closing and monthly throughout the course of the loan. 

	Property taxes
	Homeowners insurance
	Mortgage insurance
	Interest

The amounts can vary widely from home to home.  Your loan officer can assist you in estimating these up front charges.

Interest Rate

The interest rate depends on certain factors.  Some programs may have a slightly higher than market rate because of the increased risk.  Also, interest rates fluctuate daily.  Your First Equity representative can offer you a rate lock at the time of application which will guarantee your agreed upon rate at closing. 

Monthly Payment

Your payment will include

	Principal
	Interest
	Property taxes
	Homeowners insurance
	Mortgage insurance (in some cases)
	Monthly condominium or association fee, if buying condominium apartment

Before making an offer on a home, ask your First Equity representative to help you estimate your monthly payment for the particular home in which you are interested. 

How to get Started?

To start your loan application process, call a First Equity loan professional at 800-577-0270.  To complete your application, please provide the following documentation.

	Most recent 2 years of W-2's (if applicable)
	Tax Returns - Personal or Business
	YTD Profit and Loss Statement
	Most recent 2 months' bank statement
	Most recent statement for investment accounts

The following documents are needed only if applicable:

Divorce decree and/or support records

Call (800) 557-0270 for details.