San Diego, CA (PRWEB) March 10, 2014
LoanLove.com is a borrower advice website that provides up to date and in depth information in a format that is valuable to the most experienced home owners while still being accessible to those who are just starting out with applying for their first home purchase loan. The website, which has quickly become a trusted destination for current news and expert loan advice, empowers homeowners with first class knowledge, valuable resources, and connections to top rated industry professionals. A recent article from the loan advice website takes a look at the home loans for business owners in 2014, and gives an overview of some of the difficulties the self-employed have faced, and will continue to face, when applying for home loans.
The article says, “Mortgages for individuals self-employed in 2014 are likely to fall under even greater scrutiny than in the past. Congress passed the Dodd-Frank Act of 2010 to avoid another financial crisis. The measure addressed a number of issues, including the predatory loan practices behind the housing market meltdown. The new mortgage lending rule, including guidelines to assure a borrower met standards for the necessary Qualified Mortgage (QM), went into effect Jan. 10, 2014, and is designed to keep consumers from being approved for mortgages they cannot repay. The rule raises the bar for consumers to qualify for a mortgage loan, with the requirements even more challenging for the self-employed.”
Loan Love explains that the most challenging part of applying for a home loan for a self-employed individual is verifying their income. With traditional employment, loan applicants can simply turn over a few years’ worth of W2 forms. However, business owners do not have this same benefit. Instead, they must usually rely on income tax returns to prove their ability to repay their loan. This can be troublesome, since most businesses are able to avail of a number of tax deductions, which seems good, but can really hurt when lenders view the returns, as they only look at net income and the deductions make this seem lower.
The article explains, “The rules goes so far as to allow consumers to sue lenders who fail to properly verify the prospective borrower’s financial information, so there is great incentive for lenders to adhere to the guidelines. One of the critical steps involved is for the prospective borrower to provide a list of assets, a recent credit report, credit scores and evidence of other debts.”
Because lenders will now be in the hot seat if they approve a loan for someone they did not properly verify, this financial scrutinization, which was already quite heavy for self-employed individuals, is getting even more stringent in 2014. Loan Love says,
“Unless the prospective borrower can demonstrate stable or, better yet, increasing income, his or her chances of obtaining a mortgage under the new rules now in effect could be slim. Under the new QM rules, it’s questionable how much leeway lenders might feel they have, or how willing they might be to use it, to make decisions regarding mortgage loans for self-employed individuals. Unfortunately, the current economic and political environment would suggest lenders are not likely to go too far out of their way to qualify borrowers who have anything but a pristine financial history and easily verifiable income. Most lenders will not be willing to risk running afoul of secondary mortgage market guidelines.”
To read the full article on mortgages for the self-employed in 2014, please click here to visit LoanLove.com.