KeyPoint Credit Union Blog


From CEO, Brad Canfield

Undocumented Income and Mortgages for the Self-Employed

In the aftermath of the burst real estate bubble, lending standards have become much stricter. No longer can you qualify for a $500,000 loan with no documentation of your income; it’s simply too risky for lenders.
That can create challenges for software engineers and other professionals who may be self-employed in Silicon Valley. If you’re looking to buy real estate in Silicon Valley in the near future, you’ll need to keep a few things in mind as you create an American-style life here.

Tax Deductions vs. Stated Income

Self-employed software engineers traditionally take advantage of as many tax deductions as possible to decrease their income tax liabilities, but that’s the precise strategy that will damage their ability to qualify for a mortgage. Tax deductions taken by self-employed workers can drop their official income level below the threshold that credit unions and other lenders want to see from potential borrowers.
As suggested by FOXBusiness columnist Donna Fuscaldo, self-employed homebuyers should consult with their accountant to figure out the appropriate amount of tax deductions so they don’t disqualify themselves from a mortgage.

Two Years Required for Self-Employed Job

Another obstacle can emerge after software engineers leave a corporate job to start their own Silicon Valley software consulting business but haven’t been on their own for two years. Tighter lending standards mean mortgage underwriters want to see at least two years of self-employment history as part of their analysis of your financial background.
In general, borrowers encounter more paperwork and documentation requirements today than they did during the housing boom, and the self-employed face even more hurdles. Forbes provides another handy set of tips for qualifying for a mortgage when you’re self-employed.

At KeyPoint, we’re eager to work with Silicon Valley software engineers and everyone to meet their mortgage needs with a variety of great products. Contact us today to discuss your options. 


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