How Can Self-Employed Refinance?
I’m almost afraid to unleash chum into the water by asking, but with a recent post about refinancing, I have a general concern about freelancers and mortgages. I have two properties and have over 20% equity in both of them. I’ve also been self-employed (S-corp) for almost 10 years. Each year, my accountant has (legally)…
I’m almost afraid to unleash chum into the water by asking, but with a recent post about refinancing, I have a general concern about freelancers and mortgages.
I have two properties and have over 20% equity in both of them. I’ve also been self-employed (S-corp) for almost 10 years.
Each year, my accountant has (legally) done his magic to reduce my taxable income via the expenses involved investment property and my small production company.
I truly feel like since I left corporate America and went on my own, I have no idea how much I make…of course the company has a gross, but between the S-corp flow through, the expenses as deductions etc…I just focus on the fact that the bills are paid, there’s food on the table and I can travel and save a bit, because the AGI is so low.
But all that flies in the face of qualifying for a refi.
So, how can the (growing) legion of freelancers refi in this climate? Do you really have to take the hit on taxable income one year to qualify?
Guys you are completely right. My story is similar. I started refi with broker Alex Uskach from New Times Capital Corp five month ago and at the end he was able to screw everything so badly that bank declined to continue the case further. One more comment. Brokers now don’t want to do a thing for the client. Old times gone when they were willing to help and stand for the client in front of Bank. Right now they are happy that Banks are still working with them, so don’t trust anything, better go with the Bank directly.
Vanburenproud, if you are still reading, could you kindly email me at moparbrownstoner at gmail? I have a fairly urgent question to ask you about the plumbing problem you found in your house. Thanks so much.
Thank you SteamMan!!! I’ll keep trying. Hopefully foreclosures will level out and someone will return my calls!
I also had terrible experiences with the banks that hold my personal and business accounts, not to mention the actual current mortgages. I guess one in the hand is not worth two in the bush to them!
To OP:
I know my first post may have sounded like I am the business I mentioned. But I am not. I am the owner of a mechanical contracting company based here in Brooklyn. I went through hell to try to get into the apartment I now reside at. I was told by one mortgage broker he could get me a loan for 8% ! Sovereign Bank, where I had my personal accounts at the time told me they wouldn’t even talk to me. TD Bank where I have my business account could only get me $130k. That might buy me a closet in a basement in Bed-Stuy (and who would want to buy there anyway?).
I found the company I mentioned in my first post and they got me into the apartment. It took A LOT of work on their part but they made it happen at 5.125%. Not too shabby…
Good luck and don’t give up.
-SteamMan
Newsouthsloper, since you are a CPA, you must understand how this works even better than I do (not being sarcastic). I reported all my income and took almost no deductions. (For example, no meals, no trips.) Yet still there was quite a difference in the two lines of income. When all was said and done, I ended up paying about the same percentage of my income in taxes as I did when I was on staff. Maybe you can explain.
Mopar – I am a CPA, I understand there are 2 ways to “Cheat”, 1. Under report income, 2. over report expenses/deductions.
To the OP – I am aware of the “Legal” magic your accountant works (See 1 & 2 Above) Reporting personal expenses as business expenses (or claiming nonexistent expenses)is very common way to do this. The result is the same – Your taxable income is reduced so your lax liability is reduced.
I dont really mean to come off as a jerk, I just have a theoretical problem with people who want to have their cake and eat it too. I just think it is a hypocrisy that needs to be pointed out.
It’s too easy to call freelancers tax cheats when they are merely following the tax code. I certainly don’t cheat. If you are truly making it, or have a wage-earning job, then you just don’t understand how the tax code works in this situation and this income bracket.
To the OP: any good mortgage broker is going to understand this situation. I used Mark Maimon at Universal Mortgage, he was good about this, but he also sprang a surprise on me at the closing table, so I don’t exactly recommend.
newsouthsloper, all income must be reported. But that is not the number the lender looks at. They look at income minus expenses.
I was a freelancer for ten years. You don’t have to cheat on your taxes to have this problem.
Freelancers and staff both pay about the same in taxes but it’s calculated differently. In any case, the freelancers take a lot of deductions that staff don’t. So the income number appears considerably lower than the equivalent staff salary. In my experience, the lenders take this into consideration somewhat, but not entirely.