How to Qualify for a Mortgage When You’re Self-Employed

How to Qualify for a Mortgage When You’re Self-Employed

Anyone gearing up for a mortgage application is going to take some time to prepare their information, gather necessary documents, and comb through their credit reports. However, for those who write their own paychecks, the process can be a little trickier. With a few more hoops to jump through regarding income, credit, and borrowing in general, the lending process can easily deter any self-employed mortgage applicant. So, here’s our guide to qualifying for a mortgage when you’re your own boss.

Adequate Income

Although writing off expenses decreases your taxable income, it also decreases your provable income. Lenders don’t care about your gross earnings; they care about the number that you take home, which means you’ll have to prioritize whether you want to save more on taxes now or qualify for a home later. If you want your mortgage application to look its best, you’ll need to show that you have as much net income as possible, even if you’re going to pay a little more in taxes.

Necessary Documents

When applying for a mortgage, salaried workers must provide W-2’s and their personal tax returns for the past two years to show that they have both adequate and constant income. Self-employed borrowers must provide the same items as well as their business tax returns (all schedules) for the past two years.  If they are a sole proprietor, the schedule C in their personal returns would be sufficient.

Lenders don’t deny applications for having too much proof of income, so save any business documents that you feel may be beneficial to your mortgage application.

Borrowing History

Credit plays a big part in mortgage qualifications whether you’re self-employed or not. Therefore, it’s essential that you work to lower your debts and improve your score as much as possible before you begin the home buying process. Since your financial history will be under a microscope when applying for a mortgage, you must examine each of your credit reports, avoid closing or opening any new accounts, and continue making timely payments on each of your existing ones.

Down Payment

As a self-employed borrower, you don’t have to put more money down to walk away with the same deal as a salaried applicant. However, most lenders are much more likely to approve loan requests when the applicant is willing to put down more money because it minimizes the likeliness of a mortgage default. Therefore, while you’re planning to purchase a home, consider saving up for a larger down payment to strengthen your application.

Proper Planning

Buying a home isn’t a spur of the moment decision, which is why you should start planning now. By teaming up with the professionals at Butler Mortgage, you can prepare for your purchase to be way ahead of the application game. Whether you’re self-employed or in a salaried position, our team of loan experts can guide you to the best decisions for your long-term purchase and financial future. Contact our team for a free consultation by calling 407-931-3800.

Do My Tax Returns Affect My Mortgage?

Do My Tax Returns Affect My Mortgage?

If you apply for a mortgage here at Butler Mortgage (or any other lender in the U.S.), we will likely request your tax returns before offering any financial assistance. While you would think that normal financial documents cover everything needed to get a mortgage, the last two years of your tax returns are required for most mortgage loan products and paint a more detailed picture than typical income documentation like paystubs. Let us explain why your tax returns are crucial for your mortgage application.

What Part of My Tax Returns Are Needed?

We need to see all pages of your tax returns so that we can determine how much you can afford for your monthly mortgage. Generally, you will have to provide the last 1–2 years of personal tax returns, business tax returns (if you own more than 25% of one), and W-2s or 1099s. These documents let us see if you have a steady income that can sustain future mortgage payments. They also alert us of any write-offs and deductions, which may not be useable when calculating your income for qualification purposes.

How Do My Tax Returns Help Me Qualify?

When we look at your tax returns, we are looking to pull out key pieces in order to construct your total monthly income as it is defined in federal mortgage lending guidelines. Once we have that number, we are able to determine your debt-to-income ratio, or DTI. This is calculated by dividing your monthly debts (including your future mortgage) by your average income in a month. While we can work with a range of different DTI percentages, a lower ratio will allow for a higher mortgage and is more appealing to an underwriter, especially when other areas of your application, such as credit or assets, are not as strong as they could be.

Central Florida Mortgage Lenders

Getting a mortgage can seem like a daunting process, especially when lenders want to dig through your financial information and history. However, our goal at Butler Mortgage is to help you achieve your dreams and get a mortgage loan.  Your financial records are crucial to making that happen. We are experts at analyzing even the most complex tax returns and will work with your situation to figure out the best plan for your future. Contact us today and request a free consultation at 407-931-3800.

3 Big Tips for First Time Home Buyers

3 Big Tips for First Time Home Buyers Orlando Florida

Buying a house for the first time can be a daunting task. The initial down payment, closing costs, and mortgage rates all have large price tags attached and are full of minute details that can be missed by the average customer. The last thing you want is for your first home to put you into excessive debt and set back your financial future. With the help of an experienced mortgage professional, a real estate agent, and these important tips, you can feel confident as you search for the home of your dreams.

Start Saving ASAP

Long before you plan on buying your first house, you need to build up some savings to make your initial purchase. While there are many different options in the market allowing for a lower down payment, many first time homebuyers forget that there are closing costs as well.  Figure on adding an extra 3 to 3½% of the purchase price for closing costs. Dedicated saving can help prepare you for the down payment and other fees.

Choose a Smart Mortgage Plan

When looking at mortgage options, the temptation will be to spread your payments over a long period of time. Even though the monthly payments will be lower, you will end up paying far more money in the long run with a 30-year mortgage than a 15-year one.  Discuss with your mortgage professional the various term options such as 20 or 25 year mortgages if the payment on a 15 year loan is too steep. Another option is an adjustable rate loan, which can save a borrower thousands of dollars over the life of the loan.  However, if you are risk-averse and would rather have a steady payment, aim for a fixed-cost conventional loan mortgage. This will ensure that your mortgage rate will not inflate over the course of your payment schedule.

Find Your Dream Home

Buying a house is a long-term commitment, so it is imperative to find a place that checks off as many of your important desires as possible. Be cognizant of the location, neighborhood, local schools, and other factors that are major components of your life, not just the home itself. As the famous real estate saying goes, the three most important parts of a property are its location, location, and location.

Central Florida Home Mortgage

Getting your first home can be intimidating, but with the right team of professionals at your side, you can have an enjoyable experience and find the home of your dreams. Here at Butler Mortgage, we can help you through this process and determine the best financial plan for your situation so that you can begin your new life in your first home with financial security. Call us today for a free consultation at 407-931-3800.

What Is a Freddie Mac Home Possible Mortgage?

What Is a Freddie Mac Home Possible Mortgage?

Getting a first mortgage can be a difficult task. Raising the necessary funds to make the first down payment can be stressful for some people, and if you do not have a great credit score or are relatively unestablished, this can become an even more frustrating process. However, there are ways to finance a home purchase other than a traditional mortgage. Here are some details about one of these programs: the Freddie Mac Home Possible mortgage.

Home Possible Specifics

A Freddie Mac Home Possible mortgage is a way for lower-to-moderate income clients to get their first mortgage when other paths are out of reach. The main advantage of this loan is the low down payment: it only needs to be 3% of the cost of the home. Freddie Mac loans also have more flexible credit requirements than traditional loans, which can especially help young people who are relatively unestablished have their mortgage application approved.

Qualifications for Freddie Mac

In order to get a Freddie Mac Home Possible mortgage, you must meet certain criteria. To begin, the annual income of the buyer must not be greater than 100% of the median income limits of the surrounding area. However, this restriction might not apply in underserved areas. In addition, you cannot have over 43% to 45% of your income going towards debts, but you might be able to qualify anyway if you consult loan professionals. Also, you must also be a first-time homebuyer and take a homebuyer course online or in-person.

Apply for a Home Possible Mortgage

If you deeply desire to be a homeowner and think that you could qualify for a Home Possible mortgage, the most important step is to contact a knowledgeable mortgage professional and apply. A Freddie Mac Home Possible Loan can help you buy your first home when you didn’t think it would be possible financially. Here at Butler Mortgage, we can help you determine if you are eligible for a Freddie Mac mortgage and then guide you along the process towards owning your first home. Call us today at 407-931-3800 for a free consultation!

How to Get a Home Seller to Pay Closing Costs

How to Get a Home Seller to Pay Closing Costs

When buying a home, many people worry about being able to pay the initial out-of-pocket costs. With the burden of having a large down payment, the extra closing costs can cause people to have to wait on buying their home. However, it can work out in the best interests of both the buyer and seller for the seller to pay the closing costs of the property, helping you complete the sale. Keep these scenarios in mind so that you can get help paying your closing costs.

Give Them What They Ask For

Sometimes, making an offer at (or near) the seller’s asking price can benefit you more than offering a lower price point. If the seller is looking for a minimum amount of profit from the property, meeting their asking price could make the seller more likely to help out with closing costs. This way, you can incorporate the extra cost into your mortgage and spread it out rather than paying it all upfront.

Help Their Timeline

Another time that the seller would be open to helping with closing costs is if they are looking to move out and get the deal done quickly. If they have already begun a mortgage on a new home, speeding up the sale process is in their best interest, and they would be far more likely to help you out with any closing costs. A seller would also be open to helping pay closing costs if you are willing to accept the home as it stands without causing trouble during the inspection period. A little give-and-take in this area can go a long way in your negotiations.

Work With a Real Estate Professional

While getting a seller to pay closing costs is very common to mortgage transactions, in most cases, you would benefit greatly from having a real estate professional go to bat for you.  We recommend working with a Realtor for many reasons.  Among those reasons is that they are trained to negotiate and know how to take the emotion out of the process.  Their goal is to get the best deal for their customer and studies have shown that buyers and sellers alike benefit from working with such professionals.

Mortgage Experts in Central Florida

Buying a home is an exciting event, but it can come with a lot of stress when figuring out how to finance it all. Here at Butler Mortgage, we have been helping families for over 25 years!  Let us help you navigate the loan process and make sure you end up with the home of your dreams. Contact us today at 407-931-3800 and get a free consultation.

Understanding Fannie Mae HomeReady Mortgage Loans

Understanding Fannie Mae HomeReady Mortgage Loans

Finding your dream home can be tough, but acquiring a practical mortgage loan can seem even more difficult. If you are new to the home buying market, it is important to understand the different types loans available to you so that you can make the best decision. In particular, you need to know more about the Fannie Mae HomeReady loan, since it was designed particularly for first-time home buyers. To help you out, here are some of the most frequently asked questions regarding Fannie Mae HomeReady mortgage loans.

Do I Qualify for a Fannie Mae HomeReady Loan?

Fannie Mae HomeReady was designed with first-time homebuyers in mind. Since you only have to make a down payment of at least 3%, you don’t have to have a high income or large savings to qualify. And candidates with low to moderate income can even acquire a HomeReady loan with a credit score as low as 620, although having a 680 or higher will give you more favorable terms, such as a better interest rate.

What Are the Advantages of a Fannie Mae HomeReady Loan?

The minimum down payment of 3% for Fannie Mae HomeReady loan is an attractive feature to many people with limited savings. This payment can even be made with monetary gifts, grants, and Community Seconds, making it even more affordable. With a HomeReady loan, you also receive reduced private mortgage insurance coverage that can be cancelled once your home equity reaches 20%. Another advantage of HomeReady is that boarder or rental income can be factored into the application income to help improve the borrower’s debt-to-income ratios. 

Is the Fannie Mae HomeReady Loan Program Right for Me?

The needs and wants of homebuyers are diverse, which is why HomeReady loans were created to help increase eligibility and simplify the process. HomeReady has some of the benefits of government-insured mortgages, without some of the negative strings attached. If you want to find an affordable way to get the home of your dreams, HomeReady may be the right fit for you.

Where Can I Get a Fannie Mae HomeReady Loan?

Butler Mortgage has over 25 years of experience working with both first-time and experienced buyers looking to acquire a mortgage loan in Central Florida. If you want to learn more about whether you qualify for Fannie Mae HomeReady or any other first-time homebuyer loan program, contact our mortgage experts. Call us today at 407-931-3800 for more information.

Qualifying for a Home Loan with Bad Credit

Qualifying for a Home Loan with Bad Credit

Everyone knows that having good credit is important for securing a home loan. But not everyone has a sparkling borrowing history. Does this mean you can’t qualify for a home loan with bad credit? Not necessarily. There are many different options available to you. A seasoned mortgage professional will be able to help you identify the areas in your credit profile that can be improved, thus boosting your credit score.  In other words, while you can certainly do things on your own to repair your credit, developing a game plan with an experienced loan officer will help you to avoid some pitfalls that could prove detrimental to your score.

Check Your Reports

It’s important to know your credit score before you apply for a loan. Once a year, you can receive your credit score from the three national credit reporting agencies for free. It is also important to note that the score given by Equifax, Experian, and TransUnion may differ slightly from bureau to bureau. Knowing your score across every bureau is essential, because your median score will be used when evaluating your application.

Dispute Any Errors

Your credit score may be lower than it should be because of reporting errors or issues on your reports. When searching your credit reports, make sure that all of the information is accurate and correctly reflects your credit history. If you find any errors, such as payments that were incorrectly reported as late, you can dispute the error to return your score to its correct number.

Work on Building Your Score

Before you apply for a mortgage loan, you may want to spend some time on building your score as much as you possibly can. Once you’ve thoroughly scanned your credit reports and disputed errors, you can start building habits that will benefit your score. The most helpful actions you can take to improve your score include:

  • Paying your bills, loans, and other debts on time
  • Holding off on applying for new credit accounts that could bring negative inquiries
  • Keeping your credit balances as low as possible

Search for the Right Loans

If you have credit that isn’t where you would like it to be, you aren’t alone. There are countless homebuyers who have successfully qualified for mortgage loans without having the best credit in the application pool. In fact, some loan programs were designed to make low range credit applicants more eligible. Some of the most common credit-friendly loans include HARP 2.0, FHA, and USDA Rural Development.

Find an Experienced Mortgage Firm

If you want to learn more about building your credit score before applying for a loan or are ready to start applying today, you can count on the trusted experts at Butler Mortgage. With over 25 years of experience in helping homebuyers of all credit ranges, we can find the right loan for your wants and needs. Contact us online or by calling 407-931-3800 for a complimentary consultation.

How to Receive Home Down Payment Gifts

How to Receive Home Down Payment Gifts

Receiving gift funds for a down payment on a home can make owning a home turn from a dream into reality. But did you know there is a proper way to receive home down payment gifts? Before simply depositing the sum, read on to learn the right way to handle your gift.

Down Payment Gift Letter

In order to properly proceed with a mortgage transaction that utilizes a gift, you must complete a down payment gift letter, which will be provided by your lender. The letter must contain the following information: the gift amount, the address of the home you’re buying, the relationship of the donor to the recipient, and a statement declaring the gift is not a loan and does not to be paid back.

Documentation of Gift

The next step is to document the gift. If the gift is wired at closing, you will need to provide the donor’s wire receipt showing their name as the donor and evidence that the funds actually left their account. If the gift is given prior to closing, a cancelled check or a letter from the donor’s bank that the funds left the account will be necessary. For FHA loans, a bank statement from the donor showing the ability to donate such a gift is required when the loan is submitted to an underwriter for approval.

Acceptable Donors

A gift can typically be provided by a parent, grandparent, child, spouse or domestic partner, fiancé, sibling, or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship.  The donor may not be, or have any affiliation with, the builder, developer, real estate agent, or any other interested party to a transaction.

There are other nuances regarding how to handle down payment gifts, but partnering with Butler Mortgage will give you the confidence that everything will be handled properly so that you will get approved for your new home. We have over 25 years of helping buyers like you obtain mortgage loans in the Central Florida area. Visit our website or call 407-931-3800 for a free consultation.

How to Avoid Paying PMI

How to Avoid Paying PMI

PMI, or Private Mortgage Insurance, allows buyers to put down less than 20% for a down payment. However, if home buyers do take advantage of this they’re required to pay monthly for PMI. As a result, many home buyers aim to avoid paying PMI altogether. There are a few different ways home buyers and owners can dodge PMI payments.

Military Loans

If you’ve served (or are currently serving) in the military, you are eligible for a VA Loan. These loans don’t charge PMI. There is an upfront Funding Fee that VA charges all borrowers (except those who are exempt), but there is no additional amount added to the monthly payment. This is rather remarkable considering VA requires 0% down when buying a home.

Pay 20% of The Down Payment

The most surefire way to avoid paying PMI is also the simplest, namely, paying at least 20% on the down payment of your new home. If you put down 20%, PMI won’t apply and you will avoid the cost of the payments.

Piggyback Loans

A piggyback loan (or combo loan) is when a second mortgage is used to cover part of the initial mortgage’s down payment. Going with this option will also lower the percentage required of the down payment. Instead of 20%, the home buyer will typically only need to put 5-10% down, with the rest coming from the second mortgage.

Lender Paid Mortgage Insurance (LPMI)

Opting for lender paid mortgage insurance in place of PMI will eliminate the cost of a monthly PMI payment. It can also allow home buyers to put as little as 3% down on their new home. Be aware, however, that these benefits come with the cost of a higher interest rate on your mortgage. Instead of paying for PMI, that money will instead be used to cover the higher interest rates. If you plan on staying in the home for a long period of time, you may prefer paying PMI since that may be removed once you hit the 20% equity threshold.  If you go with LPMI as an option, the higher interest rate stays for the life of the loan, causing you to pay more in the long run.

Finding the Right Mortgage Program

There are other loan programs that do not require PMI, but often come with higher rates or fees.  Discussing such programs with an experienced mortgage professional will help you determine the best path forward.

The ins and outs of mortgages and PMI can be tricky. If you’re trying to navigate your home purchase, we can help! With over 25 years of experience, Butler Mortgage can find the best fit for you in order to put you in your dream home. For a free consultation, call us at 407-931-3800.

Things You Should Do Before Applying for a Mortgage

Things You Should Do Before Applying for a Mortgage

Buying a house outright (for cash) is a considerable expense that many Americans don’t have the good fortune to afford. While taking out a mortgage doesn’t require as much of an upfront investment, it is a large commitment that requires serious thought. To make sure you’re ready for homeownership, here are some things you can do before applying for a mortgage.

Fix Your Credit Score

It may seem cliché, but repairing your credit is probably the most important factor in getting a mortgage. After all, higher credit scores equal lower mortgage rates.

Organize Your Assets

Borrowers typically have to provide their previous two months’ worth of bank statements to their lender. It’s ideal to have a savings account with all the necessary funds and little activity in the past 90 days to show a trend of saving money.

Pay Down Debts

Lowering your debt results in more purchasing power because when you have less debt, you’ll be able to afford more with your current income.  A lower debt to income (DTI) ratio improves your chances of getting approved for the loan.

Budget Yourself

If you cook more at home, eliminate unnecessary purchases, and don’t spend frivolously, your savings will start to grow! Continuing to charge will add credit card debt which will eat into your DTI ratio, drop your credit score, and cause you to qualify for less.

Consider How Long You’ll Be in The Home

Not everyone needs a 30-year mortgage. For example, if you’re just buying a starter home, then a five-year adjustable rate may be easier for you. If you’re looking at a forever home, however, a 30-year fixed might be exactly what you want.

“Choose Wisely” When Applying

Make sure to select a lender with a large array of loan choices and who has the experience to help you select the right one for you!  Getting the wrong loan can have significant negative effects for your financial future by causing you to overpay by thousands of dollars over the life of the loan.

Take the First Step with Butler Mortgage

For over 25 years, Butler Mortgage has worked with both first-time and seasoned buyers looking to obtain a mortgage loan in Central Florida. Let us help find the best loan solution for you by calling 407-931-3800 or by filling out our free consultation form online.