Anyway, feel free to discuss pending home sales until we hear what happened to CR this morning.
Okay, here is quote in Maketwatch you all will like:
'The volume of activity we're seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can't because of the credit crunch.'
Lawrence Yun, National Association of Realtors
Get an Apple Mac, and rid yourself of viruses and malware (I switched 2 years ago and am very happy). The Mac Mini is a very compelling choice for Windows users.
i finally got my first call from wells fargo after becoming 3mo late. was stunned it took so long. poor girl on the other end sounded like it was her first week and that they were swamped, although i could be biased from reading this site.
Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements and proof that they've been in business for at least two years.
That's only slightly more documentation than I needed to come up with when I rented my apartment.
He says he's still finding loans for self-employed borrowers who can put down 10% of the value. A few lenders, he says, are offering loans with a 5% down payment but only to self-employed borrowers with higher-than-average credit scores.
Oh nos!! They want down payments, oh the humanity!
Shane Backer, a broker in New York, says one of his clients, a self-employed taxi driver, is having a hard time getting a loan to refinance his home mortgage, even though he earns about $85,000 a year. The problem: The taxi driver claimed a lot of tax deductions on his tax return last year, and his business shows a loss.
There's a heck of a lot of potential problems for taxi drivers, especially if he doesn't actually own the medallion.
All this wailing and gnashing of teeth because lending practices are slowing reverting to what they were way back in 2000 is starting to grate on my nerves.
It's become more difficult for successful self-employed people to get approved for mortgages economically and quickly. This is another source of drag on the housing market. It may be a long-term drag.
In most cases, lenders have no way to independently verify the information self-employed people submit.
dave, I totally agree. People want to borrow half a mill in an uneasy market and they expect it to be as easy as qualifying for a credit card at the checkout line at Target. I've noticed more and more of these "woe is me" stories and they're starting to get old.
I'm sitting here trying to think of how being turned down for a loan on your dream mansion is at all equatable to a drive by shooting. Well unless you're attempting to borrow money from the mob I guess.
This morning's problem was not actually a virus, as far as I can tell. It is the anti-virus software, which decided this morning in the middle of a download to commandeer every scrap of processing capacity my big honkin' PC has.
I am victimized! Things that should take seconds took minutes! I had to wait an hour to start my blogging! Pity me! Pity me! I'm self-employed!
I'd have assumed that for anyone loaning to an individual who owns and works at their own company, you'd look at both the individual and company's tax returns and financial statements (if they produce them)?
As far as income, I'd prefer the income tax side since these generally will be conservatively stated. Any possible expenses claimed, and any possible income deferred, where allowable (assuming no fraud)
i think the definition of subprime is 'idiot'. why would a bank loan this guy money while he still owns a home. why doesnt he sell his home first (good luck!), move to an apartment and then start building a new hom. i am sick of reading about idiots that have to pay 2 mortgages ..............in my mind this guy is an idiot and shouldnt get a cheap loan......
"Sol, that was just (the real) Sebastian making fun of us in our tin-foil hats."
Yeah, I got that. And, that was just me making fun of (the real) Sebastian. Although (in point of fact) there really are two vacant houses for sale in my little radius of the woods (er, saguaros).
Well, as a self-employed person, I can tell you that it is extremely irritating when banks cannot tell you what they want.
Here I sit, in a profitable business more than a decade old. High, high credit scores. Lots of cash for down payment (sold in '05, renting now). Years of tax returns, plus client-issued 1099's to back them up. All the bank records you could ask for.
I'm planning to buy sometime in the next two years. Not now.
So, like an idiot, I call several banks to find out whether there are additional records I should be keeping, or something. I don't want a closing to fall through when I'm ready to buy.
They have no clue. They all just wanted to open an app and see what happens.
We're self-empl. and I was surprised at how little documentation the bank wanted when I got my mortgage in June. Believe it was just last yr's. tax return. We had had a mortgage with that bank previously, don't know if that made a difference or whether they even cared about that. In earlier purchases I remember having to provide everything but my baby pictures. Guess they're going back to that again.
markel: we can probably give them a little bit of slack. I mean, with credit conditions changing on a weekly basis these days, asking them to predict what they'll want for documentation 2 years out is a tough order.
Can someone explain to me why people who can't prove up their income using a tax return to get a loan are entitled to the home mortgage interest deduction on that same loan?
You can't prove "total income" using a tax return if the business if you are treating "profit distributions" as capital gains (for the tax advantage) instead of income.
Income is viewed as being relatively stable: a business that does not pay its workers is out of business.
Business profits are not so stable in a competitive market, and banks are rightly hesitant to count such "income" in the same manner. (The equivalent is IB bonuses last year v. this coming one.)
It's not just buying a house. If you own a small business and don't show any profits on your tax returns, how the hell are you ever supposed to sell the business? Who would buy a non-profitable business?
Peterbob - Small businesses always go up. Just buy it for the pride of ownership. Stop wasting your time making money for the "man" when you could be making it for yourself. Wouldn't you like to pick and choose the color of your cubicle?
The ugly little secret regarding self-employed underwriting is that very few underwriters even know how to read tax returns, much less understand how to analyze them. That was true back even before FICO and AUS turned real underwriters into box checking clerks.
"though he earns about $85,000 a year. The problem: The taxi driver claimed a lot of tax deductions on his tax return last year, and his business shows a loss."
Yeah and I bet his business declared gross receipts of about 20K.
If there's one unintended consequence of all this it'll be watching these people unwittingly undress themselves before the IRS.
Demagoguery in regard to "stated income" is something to be concerned about. As FDR said in the depths of the Great Depression..."The only thing we have to fear is fear itself". Let's not throw the baby out with the bath water.
Banks in the 30's had this same attitude which became a self defeating process that history has left as an example.
We can, and perhaps are focusing too much on yesterday's risk. Tomorrow's risk is something completely different.
Okay, here is quote in Maketwatch you all will like:
'The volume of activity we're seeing today is below sustainable market fundamentals because some creditworthy people are trying to buy homes but can't because of the credit crunch.'
Lawrence Yun, National Association of Realtors
Pending home sales fall 6.5% in August, Realtors report - MarketWatch
I know my area has been especially hard-hit. There are now two vacant houses for sale---within a 2-mile radius of where I live.
Sebastia
Tanta
Get an Apple Mac, and rid yourself of viruses and malware (I switched 2 years ago and am very happy). The Mac Mini is a very compelling choice for Windows users.
i finally got my first call from wells fargo after becoming 3mo late. was stunned it took so long. poor girl on the other end sounded like it was her first week and that they were swamped, although i could be biased from reading this site.
Along with two years of tax returns, self-employed borrowers might be asked to provide a profit-and-loss statement, bank statements and proof that they've been in business for at least two years.
That's only slightly more documentation than I needed to come up with when I rented my apartment.
He says he's still finding loans for self-employed borrowers who can put down 10% of the value. A few lenders, he says, are offering loans with a 5% down payment but only to self-employed borrowers with higher-than-average credit scores.
Oh nos!! They want down payments, oh the humanity!
Shane Backer, a broker in New York, says one of his clients, a self-employed taxi driver, is having a hard time getting a loan to refinance his home mortgage, even though he earns about $85,000 a year. The problem: The taxi driver claimed a lot of tax deductions on his tax return last year, and his business shows a loss.
There's a heck of a lot of potential problems for taxi drivers, especially if he doesn't actually own the medallion.
All this wailing and gnashing of teeth because lending practices are slowing reverting to what they were way back in 2000 is starting to grate on my nerves.
It's become more difficult for successful self-employed people to get approved for mortgages economically and quickly. This is another source of drag on the housing market. It may be a long-term drag.
In most cases, lenders have no way to independently verify the information self-employed people submit.
dave, I totally agree. People want to borrow half a mill in an uneasy market and they expect it to be as easy as qualifying for a credit card at the checkout line at Target. I've noticed more and more of these "woe is me" stories and they're starting to get old.
"I know my area has been especially hard-hit. There are now two vacant houses for sale---within a 2-mile radius of where I live."
Gee whiz (scary monsters), there are two vacant houses for sale---within a 1/16 mile radius of where I live.
I'm sitting here trying to think of how being turned down for a loan on your dream mansion is at all equatable to a drive by shooting. Well unless you're attempting to borrow money from the mob I guess.
I had the same issue and got an iMac.
Sol, that was just (the real) Sebastian making fun of us in our tin-foil hats.
I got a mac and now I poo silk.
Seriously, folks, take the techie talk to a computer blog. We're here to laugh at lame housing metaphors.
This morning's problem was not actually a virus, as far as I can tell. It is the anti-virus software, which decided this morning in the middle of a download to commandeer every scrap of processing capacity my big honkin' PC has.
I am victimized! Things that should take seconds took minutes! I had to wait an hour to start my blogging! Pity me! Pity me! I'm self-employed!
I'd have assumed that for anyone loaning to an individual who owns and works at their own company, you'd look at both the individual and company's tax returns and financial statements (if they produce them)?
As far as income, I'd prefer the income tax side since these generally will be conservatively stated. Any possible expenses claimed, and any possible income deferred, where allowable (assuming no fraud)
Tanta,
Great blog.
i think the definition of subprime is 'idiot'. why would a bank loan this guy money while he still owns a home. why doesnt he sell his home first (good luck!), move to an apartment and then start building a new hom. i am sick of reading about idiots that have to pay 2 mortgages ..............in my mind this guy is an idiot and shouldnt get a cheap loan......
"Sol, that was just (the real) Sebastian making fun of us in our tin-foil hats."
Yeah, I got that. And, that was just me making fun of (the real) Sebastian. Although (in point of fact) there really are two vacant houses for sale in my little radius of the woods (er, saguaros).
Well, as a self-employed person, I can tell you that it is extremely irritating when banks cannot tell you what they want.
Here I sit, in a profitable business more than a decade old. High, high credit scores. Lots of cash for down payment (sold in '05, renting now). Years of tax returns, plus client-issued 1099's to back them up. All the bank records you could ask for.
I'm planning to buy sometime in the next two years. Not now.
So, like an idiot, I call several banks to find out whether there are additional records I should be keeping, or something. I don't want a closing to fall through when I'm ready to buy.
They have no clue. They all just wanted to open an app and see what happens.
Yeah, that's efficient.
Sebastian lives in Atkinson, NE
I'm not sure i understand all these self employed business people...
in my book, i finance business, and pay cash for my life...
and keep the two completely seperate...
We're self-empl. and I was surprised at how little documentation the bank wanted when I got my mortgage in June. Believe it was just last yr's. tax return. We had had a mortgage with that bank previously, don't know if that made a difference or whether they even cared about that. In earlier purchases I remember having to provide everything but my baby pictures. Guess they're going back to that again.
markel: we can probably give them a little bit of slack. I mean, with credit conditions changing on a weekly basis these days, asking them to predict what they'll want for documentation 2 years out is a tough order.
Can someone explain to me why people who can't prove up their income using a tax return to get a loan are entitled to the home mortgage interest deduction on that same loan?
You can't prove "total income" using a tax return if the business if you are treating "profit distributions" as capital gains (for the tax advantage) instead of income.
Income is viewed as being relatively stable: a business that does not pay its workers is out of business.
Business profits are not so stable in a competitive market, and banks are rightly hesitant to count such "income" in the same manner. (The equivalent is IB bonuses last year v. this coming one.)
It's not just buying a house. If you own a small business and don't show any profits on your tax returns, how the hell are you ever supposed to sell the business? Who would buy a non-profitable business?
Peterbob - Small businesses always go up. Just buy it for the pride of ownership. Stop wasting your time making money for the "man" when you could be making it for yourself. Wouldn't you like to pick and choose the color of your cubicle?
I'm not going to miss the money. I'm going to miss the stuff.
The ugly little secret regarding self-employed underwriting is that very few underwriters even know how to read tax returns, much less understand how to analyze them. That was true back even before FICO and AUS turned real underwriters into box checking clerks.
Now? ...... good luck.
"though he earns about $85,000 a year. The problem: The taxi driver claimed a lot of tax deductions on his tax return last year, and his business shows a loss."
Yeah and I bet his business declared gross receipts of about 20K.
If there's one unintended consequence of all this it'll be watching these people unwittingly undress themselves before the IRS.
Demagoguery in regard to "stated income" is something to be concerned about. As FDR said in the depths of the Great Depression..."The only thing we have to fear is fear itself". Let's not throw the baby out with the bath water.
Banks in the 30's had this same attitude which became a self defeating process that history has left as an example.
We can, and perhaps are focusing too much on yesterday's risk. Tomorrow's risk is something completely different.