Even though mortgage rates are reaching record lows, business owners and self-employed professionals are having difficulties participating in the financial opportunity. Leading news outlets are reporting that it is continuously difficult for self-employed individuals to receive traditional bank financing. Some of the self-employed individuals who fall under this category are earning high six-figure salaries as lawyers, accountants, and real estate agents.
One of the biggest obstacles for self-employed professionals is the bank’s stringent underwriting criteria when it comes to income verification. Many self-employed professionals participate in business tax deductions which lower on the income amount reported on their tax returns. This double-edged sword allows business owners and self-employed individuals to earn lucrative tax deductions, but it can disqualify them from receiving traditional bank financing. This leaves many good borrowers unable to obtain financing through traditional means.
Self-employed individuals use financing to purchase commercial real estate to owner-occupy as a company or to invest in commercial or residential non-owner occupied for the appreciation and cash-flow income. For those that don’t qualify for traditional bank financing, turn to alternative sources such as private lenders. While most private lenders do not offer interest rates as competitive as the banks, they typically provide a less stringent underwriting process and offer quicker closings.
There are some private lenders that specialize in providing loans to business owners and self-employed professionals, they commonly offer a loan program that’s called “stated income”. How stated income loans differ from other loan types is that stated income loans do not require the borrower to provide the lender with both personal and business tax returns. Stated income lenders take an asset-based approach to lending, which means they put the focus of their underwriting process on the real estate property itself rather than the borrowers personal financials.
Gelt Financial Corporation is a leading lender for stated income loans, with its program available in 40 states. Gelt Financial’s program caters to a wide array of investors by offering stated income loans for not just commercial real estate, but for non-owner occupied residential as well. Gelt’s offers a 30-year term with no balloon payment whatsoever.