Alternative Solutions to Nontraditional Borrowing
A decade later, and we’re still feeling the impact of the recession. Understandably, banks and lenders tightened their qualifications for home loans and refinancing after the housing crash. When jobs were lost, people became resourceful and often created full- and part-time self-employment opportunities. We became more mindful of what we could and couldn’t afford.
In recent years the lending guidelines have loosened and lenders are acknowledging the needs of nontraditional borrowers: self-employed business owners, those with irregular incomes, as well as people with recent credit events who may still qualify. And while larger banking institutions can address some of these needs, they’re often restricted by criteria that smaller lenders like EnTrust Funding (ETF) can work around.
YOU’RE THE BOSS
Let’s say you’ve started your own business in recent years and would like to do a cash-out refinance on your mortgage to help grow your company, consolidate your debt or make home improvements. However, you can no longer provide traditional W2s for annual income as you did when you originally bought your home. No problem!
Lenders are able to qualify applicants using bank statements to verify adequate income, savings and expenses. Fannie Mae (FHA) has a minimum requirement of two years in business but if your work is in the same field from previous employment, that time frame is more flexible. Credit score and loan-to-value (LTV) ratio requirements vary depending on the lender.
UPS AND DOWNS
Self-employment and other circumstances like retirement and trust income may result in irregular income but those ups and downs don’t necessarily mean they’re out of luck for mortgages or refinancing. Qualified borrowers with proven credit history and liquid assets can offset uneven income. As an example, a proprietor may have a year of investing in their business that doesn’t show a gain until the following year. Or a specific industry might be known for slow and robust fluctuations.
You may also need verification from your CPA or accountant who handles your business finances and tax returns. They can also advise you on deductions that could affect your qualifying down the line.
A SECOND CHANCE
Believe it or not, a recent foreclosure or bankruptcy does not necessarily spell doom for potential borrowers. Lenders like ETF offer second chance products that provide homeowners the opportunity to pursue a rate, term or cash-out refinance with qualifying credit, documentation and LTV. It’s worth checking out before you assume you’re stuck.
In a nutshell, the past ten or so years have seen a lot of change in the mortgage and lending industry but it ain’t all bad. The recession spawned a generation of entrepreneurs and creative thinkers, as well as more accommodating alternatives to big banks; not only a multitude of lenders, but lending packages as well.
In addition to bank statement loans and fresh start products, ETF also offers nontraditional programs such as pledge assets, asset depletion and foreign nationals. Contact us today to learn how we can help provide alternative solutions for your unique situation.