Requesting for a Loan Modification if Self-Employed
Loan modification is starting to be a very common way for home owners to stay in their houses by renegotiating the terms of the loan with you bank. Nevertheless, prior to getting the approval, you need to show that you can pay the modified mortgage with your current income.
If you are self-employed, it could be difficult to demonstrate your income when presenting it to the lender. This may be so for many different circumstances. Nevertheless, lenders must have a kind of proof that you will be able to pay back the loan.
In order to solve this problem, you could request your accountant about a financial statement. The financial statement should cover the last six months. It is fundamental that the financial statement is filled out by your accountant because it will bring credibility to the statement.
After you get the final number from your accountant, you consider the number as a regular paycheck. You should use that number to calculate the debt-to-income ratio which is the critical point of consideration to decide if the loan modification is going to be approved.
By using this number, you disregard the weight of employees, leases, etc. Only the basic amount showing your present earnings is shown in the financial statement.
After you have completed this step, submit this value to the bank. The value will not be audited or reviewed. The bank can use it as documentation as long as it is given by an accountant.
This is usually all the proof banks need. Lenders will take this document as proof of income when the individual is self-employed. Because lenders will take this statement as demonstration of income, they must make sure that this document comes from an accountant.
Keep in mind that lenders expect to obtain some type of demonstration of income prior to offering the loan modification. By giving the lender with the financial document prepared by your certified accountant, banks will get the proof they require to give you the mortgage modification.
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I have been self employed for several years and have noticed that it is also possible to get financing just by presenting bank statements that show regular deposits. If this works for you, you will avoid the expense of the accountant.