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How do I go about getting a mortgage when buying a house "for sale by owner"?

My husband and I are interested in a buying a home that is being sold by the owners that are selling the house on their own. We like and think it has a lot of potential. Everything has been updated, inspected, and in fair to good condition. There is no work to be done on the house other than whatever we want to change about it. Move in ready!! We had contacted a mortgage broker that deals with a Realtor agency we looked into. He doesn't want to do a mortgage with us because my husband is self employed. He told us to get back to him after next tax season?! I don't understand because my husband has been self employed for 2 years and doesn't do any tax deductions. We don't know where to turn or who talk to, to get educated on this or where to get a mortgage.... we would be 1st time home buyers Thank you KC. I like your detailed answer. HE does have an EIN. We file our taxes seperately because his is much more detailed than mine would ever be. I am really looking for suggestions as to what mortgage agencies to really use or where to turn to talk to an agent that can point us in the right direction. Also, does it help to have a specific house in mind when going for a mortgage?

Public Comments

1. Go to a local bank and try another mortgage company. You'll need money for a down payment.
2. You need to become a business with a EIN and not a simply self employed. When you have a EIN you can then work for that business, even if it's you. Banks then cannot link you to the same person and it's much easier if you can tag a LLC or even a S Corp to it. Secret is you can pay extra taxes and have a automatic higher income status. This is legal, but you cannot do this with a SS#. You need a legal enity to vouch for you even if you make it. Then you should find another bank. If you husband doesn't do tax deductions such as expense and revenue, then it says your only hustling or some thing. You have to be more professional for banks to trust your income status. You need to go beyond 1099 tax filing status. It only says you obtained some income, but not much for business income.
3. Basically, the mortgage broker is looking for what the lenders usually look for - two full years of self-employed income that can be conformed by two full years of tax returns. If your husband has been in business for two years as of say June or July, that means he has only filed 1 full year of business taxes (and which is why the broker told you to come back after your husband has filed one more year of taxes). Rather than go through a mortgage broker, why not go to the bank that your husband does business with. They will know him better and will have better access to his banking records to verify income, etc. (This works out even better if the bank is a local bank as opposed to a national bank like BoA). Once you have the earnings income needed to satisfy the bank, it really doesn't matter whether you are LLC, S-Corp or sole proprietor - the income is basically the same (the only difference is the liability which is a separate issue and once you buy the house, your husband really needs to S-Corp of LLC his business to separate business liability from personal liability).
4. a real estate buyer's agent can help you negotiate the price and seller carryback terms. in that case, the agent might ask you to pay for the commission or part of it since you are not cashing out the seller. also, your buyer's agent can find a mortgage firm that can handle the self-employment component of your family. depending on where you live, I may also have a 2nd option that can be v e r y beneficial to you