Add the returns up first
A great many self-employed buyers are quoted a non-QM rate they never needed.
There is a habit in this industry of hearing "self-employed" and reaching for a non-QM product. It is faster, and the file is simpler, and it is often more expensive than it needed to be.
What gets added back
Conventional underwriting for a self-employed borrower is not the bottom line of your return. Several non-cash deductions are added back, because they reduced your tax without reducing your cash:
- Depreciation — usually the largest single add-back, and the one that catches people with vehicles and equipment.
- Depletion, where it applies.
- Amortisation and casualty losses.
- Business use of the home, in the usual case.
- Certain one-off, documented, genuinely non-recurring expenses.
Why it matters more than the rate
A conventional loan generally prices better than a bank statement loan, allows a smaller down payment, and has mortgage insurance that eventually falls away. If the arithmetic works, none of the non-QM conversation needs to happen.
If your returns qualify you, you should not be paying a non-QM rate for the convenience of nobody adding them up.
Odette Fontenot
Mortgage broker, New Orleans
Every figure and rule described here is illustrative and general. Programme rules differ between lenders and change over time, and this is a demonstration site written by a practice that does not exist.
- Bank statement loansThe expense factor is the negotiationEveryone shops the rate. On a bank statement loan the number that decides whether you qualify at all is the one nobody asks about.
- Bank statement loansTwelve months or twenty-four?Choosing your look-back period is the cheapest decision on the file, and the one most often made by accident.
- Investment propertyOn a Gulf South rental, quote the insurance firstThe premium decides more deals here than the interest rate does, and it arrives late enough to break them.