Monthly Archives :

May 2018

Self Employed Home Loan

Getting A Mortgage Loan If You’re Self Employed

 1000 500 Sam Radbil
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The age-old self employed mortgage loan issue. You took the plunge and started your own business away from your family and you’re having success. Awesome, right!? Now you are no longer relying on a W2, so there are some hugely important things you MUST know when it’s time to apply for a mortgage.

It was undoubtedly a serious challenge to drive your business from inception to true profitability. You had to find your location—or build your virtual store—find vendors, get permits and licenses, hire your first employees, consult with lawyers and accountants, and then find and retain customers. Now that you are successful and you’re finally feeling better about surviving, why is it so difficult to get a home loan?

Banks Don’t Like You

self employed mortgage loan

Many entrepreneurs report that the initial visit to the mortgage lender’s office isn’t pleasant. Bank officers often cast a wary eye toward small business owners because:

  • Stated income can be difficult to prove.
  • Accounting records may be incomplete.
  • Bankers think small business owners can be riskier borrowers.
  • There is a perception that owner/operators conceal income and avoid taxes.
  • Business owners commonly sign personally for business debt.

But does that mean you’ll never own a home?

Let’s take a look at this scenario: let’s say you’re a small business owner in Denver, Colorado. You might think that you’re stuck renting that one-bedroom Denver apartment forever, since you’re unable to prove income to the bank. So, what are the issues?

Income Issues with Self Employed Mortgage Loan

If you work for someone else, your paycheck goes toward your rent or house payment, car payments, various insurance obligations, repairs, maintenance, etc. If you own a business, however, your business may provide you with a car, a computer, health insurance, life insurance, meals, travel and more.

Self Employed Home Loan

If you make $75,000 per year, for example, you can take your pay stubs to the bank and that will prove your gross income. If your business can produce $75,000 in gross profits, savvy business owners have their business make car and insurance payments directly, and by the time all owner benefits have been deducted, the business may show a much smaller profit, and the owner may legitimately report a smaller income amount. 

Explaining to the banker that your $20,000 income is really $75,000 because of all the benefits your business provides you is not always met with quick acceptance. 

Cold Hard Cash — Good For Self Employed Mortgage Loans?

Let’s face it, although some businesses are becoming cashless, there are usually opportunities for business owners to pocket cash without reporting it as income (make sure you know the rules). Unlikely that the bank will consider any unreported income as valid for the purposes of obtaining a loan.

Cash Money for Home Loan

Lots of Business Debt

While many think that entrepreneurs can obtain business loans without having to sign personally, this is usually not the case, and small business owners many times will have signed for substantial company loans. Banks typically treat these as personal obligations and can count them negatively when figuring debt to income ratios.

What Can You Do?

As you know, we agree that traditional mortgage financing is preferable, but when circumstances cause that route to be difficult, consider giving is a call at C4D. We are MN contract for deed experts and we understand that owning a small business should not be an obstacle to home ownership. We look beyond raw numbers to truly understand your financial situation, and we can work with a variety of circumstances. As our satisfied clients tell us, “Wow, you were able to help us when the bank said no!”

Buying A Home With Bad Credit

Client Testimonial: Carmelo Buys A Home With Bad Credit

 1000 500 Sam Radbil
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“My credit score was very low and I couldn’t find a single bank to help me get a loan for a new home. The C4D Crew worked with me to help me purchase my home and it was awesome!”

At the C4D Crew, our main goal is to help Minnesota homebuyers — specifically those struggling to obtain traditional financing — purchase their dream home. We’re very fortunate to have worked with some awesome clients who were finally able to become homeowners, so we wanted to share their experiences, told directly by them, with all of the future homeowners out there who might benefit from working with us.

This newest testimonial comes from Carmelo. He struggled with buying a home with bad credit for years and year and was unable to get financing from the banks in a traditional manner. That’s where we were able to help. We’re happy to say that Carmelo is truly enjoying the homeowner lifestyle! Here’s what he had to say:

Why did you choose to work with the C4D Crew?

Carmelo: My credit score was very low and I couldn’t find a single bank to help me get a loan for a new home. The C4D Crew worked with me to help me purchase my home with bad credit and it was awesome!

What financing issues did you have prior to working with the C4D Crew?

Carmelo: I had a poor credit score which was a huge roadblock in the way of getting financing from a traditional bank.

What impressed you about the C4D Crew? Did they help you overcome your financing issues?

Carmelo: These are just very nice people. It was great to work with a company who really, truly cared about the wellbeing of the customer and my family. We really had no issues when working to overcome my bad credit score to purchase a house for me and my family. There were no hiccups along the way, unlike when working to get more traditional financing.

What service did you get from the C4D Crew that you couldn’t find elsewhere?

Carmelo: I worked hard to find traditional financing in the past. The service I got from Taylor and his team and the C4D Crew was fantastic. Simply put, they helped me get the loan that I needed and they made it happen quickly. I’m grateful for this and for my new home. And the process was very clear to understand!

Would you recommend The C4D Crew to your family and friends?

Carmelo: Absolutely yes. Without a doubt. Taylor and his team are going to do exactly as they say. They’re going to help you a lot.

For more information on working with the C4D Crew to finance your next home in Minnesota, contact us any time and we’ll get in touch with next steps!

2018 Realtor Tips: Handle Rising Interest Rates

 1000 500 Sam Radbil
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Rising interest rates in real estate — sounds awful for both homebuyers and realtors, right? Well, you’re in the right place find out. Below, the C4D Crew will outline what factors influence interest rates and what rising interest rates mean for the real estate industry.

The 2008 housing crash was hard enough to deal with. Besides the record foreclosure numbers, Realtors had to deal with very tight lending conditions along with a new and stringent set of government banking regulations. Gone are the days of wild west type appraisals and easily obtained no income documentation loans. While this period has been replaced with a mortgage market some would call the “new normal,” there is an evolving twist MN Realtors now must deal with.

Rates Are Going Up

Mortgage rate predictions for 2018 and 2019

Agency

2018 Prediction

2019 Prediction
Mortgage Bankers Association 4.9% 5.4%
Freddie Mac 4.6% 5.1%
Fannie Mae 4.5% 4.5%
Realtor.com 5.0% No forecast
National Association of Realtors 4.5% 4.8%
Kiplinger 4.7% No forecast
National Association of Home Builders 4.5% 5.0%

Early in the recovery, nicely qualified buyers could actually get 30-year traditional mortgages at rates around 3.25 percent. Now, rates are nudging up to the psychological five percent barrier. Simple math shows us that a $200,000 mortgage at 3.25 percent costs $870.41 per month. At five percent, however, the payment jumps by $203.23 to $1073.64.

To get that payment close to $870.00 with a five percent interest rate, the mortgage amount needs to drop to $165,000. This is a significant 18 percent drop in purchasing power. In other words, a buyer that could have qualified for a $200,000 mortgage at 3.25 percent, now may only be able to finance $165,000.

What Do Rising Interest Rates Mean?

CNBC reported in February:

Sales of newly built homes are falling, and the culprit is clear. Homebuyers increasingly can’t afford what they want. Higher mortgage rates, combined with the loss of homeowner tax breaks in some of the nation’s most expensive markets, are taking away buying power.

Home Sales

Image source: Redfin

Sales fell in December, when the new tax law was signed, and then again in January, when mortgage rates moved higher. Sales are now at their lowest level since August of last year.

“It seems that the jump in mortgage rates in January had an immediate impact on contract signings,” wrote Peter Boockvar, chief investment officer at Bleakley Advisory Group. “You can’t get more interest rate sensitive when it comes to homes and cars with the associated cost to finance.”

What Realtors Can Do

Savvy Realtors need to understand that while upward interest rate trends can be an issue, there are some ways this situation can be managed. Sellers can make things easier by offering to pay closing costs buyers certain remodeling credits, or of course lowering sale prices.

Rising Interest Rates Loan Rejection

Buyers may need to rethink their plans for an ultimate dream home and take an intermediary step instead of a final one. Maybe that $350,000 home will have to wait and a $240,000 will have to work for now.

Make It Happen Now

The upward interest rate trend is no secret, however, and Realtors should push both sides to get deals done before rates rise even more. Lock in today’s rates as soon as possible as each Federal Reserve interest rate hike will do more damage to the housing market.

Consumers Getting Priced Out?

Family Buying A Home

In a rising interest rate environment, more consumers are going to be priced out of traditional mortgage financing, and this is where we at C4D can help. Using MN contract for deed, we make deals happen that banks have refused. We understand bad credit issues, and we want to help ensure that good people that may have had some financial issues are able to become homeowners. Don’t give up on your rejected traditional mortgage deal; instead, bring it to C4D and we will see if we can help.

Buying A House Without A Realtor Is A Bad Idea

Buying A House Without A Realtor: Terrible Idea?

 1000 500 Sam Radbil
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Buying a house without a realtor. For some reason, this just doesn’t sound like one of your best ideas yet.

You may be the kind of person that wants to handle everything without assistance from brokers or agents. When you make a major purchase you always want to talk to the supervisor or store owner, and you may not like dealing with middlemen. When you are looking to buy a MN home, however, you really need to consider the use of a qualified Realtor, and here are some reasons why:

You May Have a Harder Time Finding Properties

Realtors have MLS access but you can’t just login online to view it. While Trulia, Redfin, and similar sites will eventually pick up MLS listings, there is nothing like going to the source and being able to view up-to-the-minute listed properties that are for sale. Your local real estate agent may also have a network where he or she is made quickly aware of any “coming soon” properties, and your Realtor can find out sooner if a house under contract may again become available because of failed financing or other issues. In addition, other Realtors may be more apt to divulge information to another Realtor than to you.

Buying A House and Knowing The Price

Area Knowledge

Especially if you are new to a city, you need a Realtor’s intrinsic neighborhood knowledge. Many of us know someone that recently moved to a city and chose a certain neighborhood only to realize a year later that they would have liked to have located in a different part of town.  A good Realtor can help guide you to the neighborhoods that match your lifestyle.

The Offer (When Buying A House Without A Realtor)

Do you offer 97 percent of the purchase price? 95 percent? Are you in a bidding war? Should you offer more than the asking price? Should you ask for paid closing costs? What does the inspection period mean? Do you realize, that in some states, you can lose your earnest money deposit even if your financing is not approved? Realtors are experts, and will guide you through the offer process. Take a look a standard offer to purchase form, and ask yourself if you really know how to fill in all of the blanks properly. A Realtor will have had lots of experience with contingencies, and will help you understand all fees involved in a purchase contract.

Buying A House Without A Realtor

Be Realistic About the Deal

While you may think it’s a good idea to haggle about the final $1000 of a $350,000 deal, your Realtor may tell you otherwise. Realtors have a good sense of what will be accepted and more, importantly, what may aggravate a seller. When you deal with sellers without a Realtor, you may be working blind.

Financing Issues When Buying Without A Realtor

If you have MN bad credit, or are having trouble buying a home because of massive student loan debt, a good Realtor can steer you to non-traditional financing sources. We at C4D are experts in MN contract for deed sales, and many Realtors come to us with deals that have been difficult to finance elsewhere. While we all know that traditional mortgage financing is preferable, many times we can help get you into your dream home when others have not been successful.