By now unless you've been living in a cave, you almost certainly know that as a result of the financial meltdown mortgage lending has changed permanently. And unfortunately for most home buyers, the change is not beneficial. And while some changes to mortgage loan programs were appropriate, as usual government and the banks went to the other extreme.
This overreaction has virtually eliminated many self-employed home buyers from the housing market. Many self-employed home buyers find themselves in a "Catch 22" scenario. Do they take the most aggressive approach to their Federal and State taxes or do they take a much more cautious approach to taxes so as to show enough income to qualify for a home loan on a home they really want to purchase? It's a tough call. Being self-employed myself, I understand their frustration.
In the 'wild wild west' days of mortgages and real estate, a self-employed home buyer could just do a stated or no doc mortgage to obtain a mortgage to obtain a home. They could even get no doc jumbo loans. Mortgage lenders were doing 'one ups' on each other to see just how low they could go. This was particularly true for the now extinct sub-prime lenders. It got to a point just before the house of cards came tumbling down that mortgage lenders were reducing their standards almost every day to capture market share. Those days are virtually gone except for some private mortgage programs and seller financing. These people are essentially the new sub-prime lenders. Millions of distressed home sellers are resorting to owner financing just to get rid of their homes or in the case of businesses, their commercial property.
Self-employed buyers will either go with a private mortgage loan from a private lender or owner financing (obviously also private lending but different) or have to settle for less property. It's a shame because many self-employed home buyers have excellent credit but are just a bit short on taxable income to be able to afford the property they really yearn for. However, there is some good news. Well it's really good and bad news. The good news is there are a lot of foreclosed properties for sale at 'fire sale' prices. The bad news is decent people lost their homes in order for them to be obtainable at such a low price. It is the new law of the real estate jungle. With a bit of luck most home buyers and home sellers have learned the priceless lesson that their home should not be treated like a financial instrument. It should be treated as their place of safety.
Ron Stone is a financial specialist. He owns a note buying business as well as assists home buyers in finding private jumbo financing. Learn more at his websites,
Sell My Note or
No Doc Jumbo Loans
