Thrive Mortgage embraces and celebrates the entrepreneurial spirit more than most lenders. After all, entrepreneurship and innovation are at the heart of who we are. Just because your finances are more complicated than the average borrower, does not mean your mortgage strategy should be as well. Our goal is to guide our clients through the application and loan approval process step by step, making it as simple as possible. To best prepare for what is ahead, here are some thoughts for you to keep in mind…
Understanding Your Options
The first thing you should know is that there are literally thousands of loan program options available in the market. Depending on your plan for your financial future, the type of home you are thinking of financing, and the time frame you plan to own the home, we can direct you on your best strategy for you.
Most loan programs fall under some category of “conforming”, or Qualified Mortgage (QM), products. These are the most common in the industry and generally include Conventional, FHA, VA, and USDA programs (click each program link to read more). They are often very straightforward with their guidelines and document requirements and easy to complete. But sometimes the guidelines of these popular products do not serve the needs of self-employed borrowers.
Thrive Mortgage has an entire division dedicated to Unique Loan Products. In this segment of the industry, you will typically hear us refer to it as Non-QM* (that’s short for Non-Qualified Mortgage). It doesn’t mean these loans are bad, they’re simply the round holes in a world of square pegs. But you’re a round peg, and we will find the best strategy tailored specifically for your needs.
To hear the rest of the story, continue reading the rest of this subject in “Part 2”.
If you’re ready to begin a conversation now with a Thrive Mortgage expert, navigate to our LO Directory Page to find someone in your local area and get started today!
In Part 1 of this series, you learned about the two primary categories of loans available in the mortgage market (QM versus Non-QM). In Part 2, we’ll cover a few more details pertaining to Documentation, Managing Expenses, and Credit Scores. Let’s dive back in!
If your income is documented on something other than a W2, some programs will use tax returns. We may not be accountants, but we know how to wade through all the forms and make sense of it all. In most cases we’ll need two years’ of returns in the file. Just remember… every homebuyer is different and so are tax returns - make sure to provide all schedules. In addition to the returns, it would be good to have a year-to-date P&L statement handy for every entity you own as well because we’re probably going to ask you for that, too.
Other unique programs may not need tax returns at all. Sometimes we can use bank statements or other financial documents demonstrating stable and continuous income from vetted sources. The bottom line is we must build a strong case to demonstrate your financial wellness to our investors underwriting these loans. We try to keep documentation gathering to a minimum, so if we ask you for it, it is important.
Keep Personal & Business Expenses Separate
Simple tip… the more you can keep your business and personal accounts separated, the easier that will make our documentation requirements. Now, again, how you run your business is your business. But just know that if business and personal accounts overlap, there may be some additional documentation we are going to require.
Usually this is to justify anything considered by the underwriter as a large expense or deposit out of or into any account we’re using for qualifying. This is standard practice even in the conforming world. Most of the time it’s a pretty easy explanation, but it’s still one more document we have to gather creating more work for you as well.
The less that we must unravel from an Underwriter’s perspective, the faster your file will sail through to closing day. And everyone LOVES that day, right?!
Managing your credit profile properly is always a good habit to build. Often times, however, many consumers think they have a handle on it but are surprised to find they overestimated their rating when a lender pulls their credit. Don’t think… KNOW.
There are many ways to manage your credit profile well and we cover those in much greater detail in our article titled “Credit Scoring in The Mortgage World”. Make sure to check that out for a solid overview of what you should be doing. In the meantime, the basic principle you need to know is that credit is only one variable in this process, but it drives many of the other components going into every mortgage application.
For business owners, it is important to keep a close watch on your Credit Report especially if you use your personal credit, rather than a business tradeline or line of credit, for financing your operations. If you use your personal credit actively in opening business accounts, then those liabilities may have to be counted against your personal liabilities in our income analysis (even if you pay it off every month).
So where do we go from here?...
You have a vision for creating something special that positively impacts the lives of your employees whether that is a staff of one or one thousand. You need a strategy for managing your mortgage that complements the nuances of your unique financial situation. Ready to begin a conversation? Click HERE to access our Loan Officer Directory and get connected with a local expert who can advise you on the best strategy to set you up for future financial success!
James Duncan is the Director of Education & Engagement for Thrive Mortgage and has contributed to numerous published works and industry discussion panels. As a former high school teacher, mentoring and coaching is his biggest passion. Whether it is leading the Marketing Department at Thrive or working individually with clients to help them make better educated decisions, James has a tremendous passion for moving the industry forward.