Buying a home

FlyingVan · Jan 6, 2012

Got a question for you expediters out there.

Any of you were successful buying a home since you started expediting?

I am tired of paying rent, been doing it for too long. I feel that the money that I pay to the landlord I could pay my mortgage. So, I saved some money for a GOOD down payment, I have no debt whatsoever, good credit score. But, I have a problem. I am driving a Sprinter and I get lots and lots of deductions, so my adjusted gross income is very very little. I have talked to a few banks and mortgage companies and all are soooo helpful until they get to the line 37 on the income tax return. At that point they don't even want to talk to me any more.

It is ridiculous to go by adjusted gross income only, since by that number I cannot afford even my rent that I pay now, heck, I wouldn't afford to even eat. There must be something else I can do.

If you were successful in getting a loan, how did you do it?

It bugs the tar out of me since a few of my friends bought homes, and they have lower credit scores and are in debt up to their eyeballs, but they qualified.

Any comments are appreciated.

davekc · Jan 6, 2012

You are going to experience a difficult time with documentation of minimal income. Three or four years ago you could have done a "no-doc" loan, but those are a thing of the past.
You may be better served to search out a lease/option or owner financing.
Just an after thought, they have houses in Cleveland for a few thousand or less. Probably Detroit as well.

zorry · Jan 6, 2012

Agree with Dave. Seller financing may be your best option. Whenever you go for financing address the high gross- low net situation first. If they don't understand your situation don't waste anymore of your time.

Monty · Jan 6, 2012

Does it matter where you live?

Different areas have different markets. A viable option for you, (since you do not have to move in immediately,) might be a repo, tax lien, sheriff's sale, etc ..

You are fortunate in this, a buyer's market, now to qualify for the loan!

Buyers markets say you can pretty well set any reasonable price.

Have you contacted a realtor to handle the details for you? They know ways to get things done, since they wish the commission!

usafk9 · Jan 6, 2012

I disagree with Dave and Zorry both.

Buying with a lease/option or seller financing (unless you find a truly desperate seller who holds title free and clear of any encumbrances, and is offering market terms with no balloon) is a license to get hosed. Your good credit score and zero debt dictates that you should be getting treated like someone who knows how to manage money.

FHA/VA and conforming loans still do manual underwriting. While it will take some work to find some Loan Originator who has the brains to add back in things like depreciation and per diem to your income, instead of simply inputting your AGI into your URLA (that's your loan application), these people are out there.

I'm hoping that your rent history is documentable (not just a written verification from the landlord...cancelled checks or money order stubs, or bank statements showing transfers for rent payments), and that you have a couple other provable regular monthly payments (think cell phone, insurance).

I think, if what you say is true, that you are financeable. It's going to take some work, but I believe very worth it.

Let me know if you need help finding someone. I know several in several states that are very ethical (okay, I know some of the other kind, too).

davekc · Jan 6, 2012

Probably should add. Like any real estate transaction, hire an attorney to close your deal. As mentioned, you can get hosed with a lease/option or owner financing, but if you have a hired real estate attorney, you should avoid any of the pitfalls.

luis27501 · Jan 6, 2012

In this business you can take a lot of deductions but you have to choice from what you wanna do in the future. Taking all of the possible deductions will decrease your AGI which eliminates the possibility of you paying a small amount in taxes or nothing at all. Even with perfect credit lenders wont lend money unless you have a decent AGI on your tax forms. Plus you have to also consider what type of home you trying to get is it within your budget. My best advice hire a good accountant or if you already have one explain what you wanna do, he/she might be able to help you just claim fewer deductions at the end of the year, which in most cases you will end up paying some taxes, but your AGI will increase with less deductions.

chefdennis · Jan 6, 2012

While its too late now..This is an example of 1 reason to set your business up properly (incorporate) and set yourself up on a salary....even if just on paper....you show an income, the corp takes the deductions and runs at a loss if thats what you and your accountant feel the need to do....

But that being said, as has been pointed out, there are underwriters that can make this happen if it is as you stated, but you will have to do the leg work...

usafk9 · Jan 6, 2012

So what you're saying, Luis, is that he should pay more taxes so that he looks more appealing to a lender?

Posted with my Droid EO Forum App

fastman_1 · Jan 6, 2012

I built a house in 2000,I'm a llc and pay me on paper,had no problems getting a loan,but that was back in 2000 when if you could sign your namevyou got the loan.

davekc · Jan 6, 2012

Much different animal today when it comes to financing.

DannyD · Jan 6, 2012

Two words- Can't stress this enough. Not sure how to make the real big letters but the words are this:

CREDIT UNION

I'm not promising anything here, but a credit union takes a more common sense approach to lending. They realize self employed people often have low incomes for tax purposes.

If your taxes after mileage is $1,238- or whatever, a bank will look at your income & figure ya made a thousand bucks that year. A credit union will look at your total income, bills, payment history, etc.

I'm in the market for a new van. Just for kicks I went to my bank of about 40 years & asked them for a loan. Other than a few overdraft glitches years back I've had perfect credit w/ em. They can see all my transactions cuz I have 2 credit cards w/ em. No snarky type purchases. All are fuel, food, phone bill, etc.

I knew dang well they weren't gonna approve a loan & sure enough they came thru & didn't.

When I bought my current van I think-this is from memory, but all I got was a note from the owner of a company stating he felt I should be able to make X amount of dollars if I had a van. If that's not it, then I showed a credit union a few paystubs, told em my then current van was breaking down & I needed to replace it or I'd have no job. They gave me the loan. Can't recall exactly the scenario for getting the loan but I remember it wasn't very difficult.

The only thing they want, is ironically for you to NOT pay it off too early. I don't mean a few months off the loan, but if you take out a 20 year loan don't pay it off in 3 years. They mentioned that to me when I would pay like 3 months at a time. That they'd prefer to make a little money on me along the way.

Then again at the interest rates today being as low as they are, the incentive to pay it off early isn't all that great.

Good luck to ya-

FlyingVan said:
Got a question for you expediters out there.

Any of you were successful buying a home since you started expediting?

I am tired of paying rent, been doing it for too long. I feel that the money that I pay to the landlord I could pay my mortgage. So, I saved some money for a GOOD down payment, I have no debt whatsoever, good credit score. But, I have a problem. I am driving a Sprinter and I get lots and lots of deductions, so my adjusted gross income is very very little. I have talked to a few banks and mortgage companies and all are soooo helpful until they get to the line 37 on the income tax return. At that point they don't even want to talk to me any more.

It is ridiculous to go by adjusted gross income only, since by that number I cannot afford even my rent that I pay now, heck, I wouldn't afford to even eat. There must be something else I can do.

If you were successful in getting a loan, how did you do it?

It bugs the tar out of me since a few of my friends bought homes, and they have lower credit scores and are in debt up to their eyeballs, but they qualified.

Any comments are appreciated.

gardair · Jan 6, 2012

Bubba Blue: Forrest, if we was in the shrimpin' business we could just live on the boat.....wouldn't have to pay no rent

Forrest Gump: that sounds like a good idea to me, Bubba....

moral of the story....when considering getting in debt.....RUN FORREST, RUN!!!!!!!!!!!!!!!!!!

(Just the un-asked for opinion of a debt-free grey haired old man with a little money in the bank and food in the freezer. Debt free is the way to be!!!)

usafk9 · Jan 7, 2012

DannyD said:
Two words- Can't stress this enough. Not sure how to make the real big letters but the words are this:

CREDIT UNION

I'm not promising anything here, but a credit union takes a more common sense approach to lending. They realize self employed people often have low incomes for tax purposes.

If your taxes after mileage is $1,238- or whatever, a bank will look at your income & figure ya made a thousand bucks that year. A credit union will look at your total income, bills, payment history, etc.

I'm in the market for a new van. Just for kicks I went to my bank of about 40 years & asked them for a loan. Other than a few overdraft glitches years back I've had perfect credit w/ em. They can see all my transactions cuz I have 2 credit cards w/ em. No snarky type purchases. All are fuel, food, phone bill, etc.

I knew dang well they weren't gonna approve a loan & sure enough they came thru & didn't.

When I bought my current van I think-this is from memory, but all I got was a note from the owner of a company stating he felt I should be able to make X amount of dollars if I had a van. If that's not it, then I showed a credit union a few paystubs, told em my then current van was breaking down & I needed to replace it or I'd have no job. They gave me the loan. Can't recall exactly the scenario for getting the loan but I remember it wasn't very difficult.

The only thing they want, is ironically for you to NOT pay it off too early. I don't mean a few months off the loan, but if you take out a 20 year loan don't pay it off in 3 years. They mentioned that to me when I would pay like 3 months at a time. That they'd prefer to make a little money on me along the way.

Then again at the interest rates today being as low as they are, the incentive to pay it off early isn't all that great.

Good luck to ya-

Financing a vehicle and financing a home are two very different animals.

Credit Unions may underwrite conforming and govvie loans, but they're still selling to the big 4 banks (over 95% are), and have to underwrite to those banks' standards.

Vehicle loans are 'portfolio' loans (loans that they keep). Very, very seldom does a credit union keep residential mortgages in-house.

Going to a credit union is a good place to start, but the end result is the same if the LO isn't too lazy or isn't too dumb to add back paper losses from the tax return.

Fastman- You would be shocked at some of the exotic crap that was being jammed down our throats in those days. One company actually sent us flyers of their "just out of the pen" (meaning just got paroled) loan....and, you guessed it, 100% financing if he had a job....even if he started the day he got out, as long as boss would verify that he hired him.

And lastly, Gardair's advice is the best yet.

mxzane933 · Jan 7, 2012

Whats the need for a house anyway?. They suck they are stuck in one place lol.

Sent from my DROID BIONIC

usafk9 · Jan 7, 2012

They're a great place to store a machete.

Posted with my Droid EO Forum App

ATeam · Jan 7, 2012

FlyingVan said:
Got a question for you expediters out there.

Any of you were successful buying a home since you started expediting?

I am tired of paying rent, been doing it for too long. I feel that the money that I pay to the landlord I could pay my mortgage. So, I saved some money for a GOOD down payment, I have no debt whatsoever, good credit score.

When you say "GOOD down payment," what amount are you talking about (don't need to know, but consider the number). You may be able to pay cash for a house. House prices in some areas have plummeted to levels that were unimaginable a few years ago.

Note the double-edged sword. Home equity is not what it used to be. Banks have tightened mortgage loans because they have seen home prices decline in recent years, which reduces the value of the collateral (house) that secures the loan. There are exceptions of course in various areas but in general, where a house can be bought for a song, it is not likely to go up in value anytime soon.

Home equity is not the risk-free asset it used to be, and it may be years more before it becomes good again. Not so long ago, people liked to buy houses because they went up in value while the mortgage was being paid off. Not so today.

Proceed with caution and take careful note of your beliefs about housing, equity, etc. The beliefs you formed long ago may be false today and could lead you into a major mistake. The conventional wisdom that many people put out there today is not wisdom at all.

The housing market crash was a CRASH. Market assumptions that were once valid are valid no more. Notice all the real estate professionals, lenders, speculators, and homeowners that got wiped out because they thought they knew what they were doing. Ask yourself, am I smarter than them? Do I know more about real estate than they did? What makes me think I won't be wiped out by real estate like they were? What makes me think that I know what I am doing?

Assume nothing. Suspend all of your real estate beliefs and approach this decision/opportunity/risk as if you have never seen or heard of real estate before. The game is different today. You can still win but you need to understand the game. More importantly, you need to understand what you believe about the game.

If you think scoring touchdowns is the way to win but if the game has changed and you do not know that a field goal is now worth 10 points, you will lose, even though you are doing everything you know how to do to win.

I cannot stress this enough. Real estate is a different game today. The rules have changed. You need to know the game and you need to know what you believe about the game.

luis27501 · Jan 7, 2012

usafk9 said:
So what you're saying, Luis, is that he should pay more taxes so that he looks more appealing to a lender?

Posted with my Droid EO Forum App

Yes, lenders will not consider you if you have a low AGI if you are self employed its like a red flag to them, hiring a good accountant will help maximize AGI with little or none on paying taxes. Like I stated on my privious post, being self employed you will have to decide what you wanna do in the future. Meaning if you wanna purchase a home or get any loan you will have to show more then enough to cover the payments. Also a good accountant will provide a profit/lost statement monthly or quaterly that way you have an idea on how much you will expect on paying taxes at the end of the year and gives you time to save money to pay taxes or come up with more deductions to reduce it or eliminated. Yes, we hate paying a lot in taxes but lenders only want one number and that is your AGI if it dont meet there requirements you will have hard trouble getting loans.

A good margin AGI is at least $30,000 anything less lenders will think about it. But of course showing that much AGI comes with a price at the end of the year TAXES. Thats why, I keep saying hire a good accountant there fees are also a tax deduction, he/she will help maximize AGI.

usafk9 · Jan 7, 2012

luis27501 said:
Yes, lenders will not consider you if you have a low AGI if you are self employed its like a red flag to them, hiring a good accountant will help maximize AGI with little or none on paying taxes. Like I stated on my privious post, being self employed you will have to decide what you wanna do in the future. Meaning if you wanna purchase a home or get any loan you will have to show more then enough to cover the payments. Also a good accountant will provide a profit/lost statement monthly or quaterly that way you have an idea on how much you will expect on paying taxes at the end of the year and gives you time to save money to pay taxes or come up with more deductions to reduce it or eliminated. Yes, we hate paying a lot in taxes but lenders only want one number and that is your AGI if it dont meet there requirements you will have hard trouble getting loans.

A good margin AGI is at least $30,000 anything less lenders will think about it. But of course showing that much AGI comes with a price at the end of the year TAXES. Thats why, I keep saying hire a good accountant there fees are also a tax deduction, he/she will help maximize AGI.

So that I understand you completely, you're saying that lenders only look at the Adjusted Gross Income on my tax return to determine if I make enough to repay a loan, if I'm self-employed?