The Basics of a Loan Modification for the Self-Employed

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Loan modification is starting to be a highly used manner for home owners to keep their homes by negotiating the terms of the loan with you bank. However, prior to being approved, you must show that you can pay the modified mortgage with your present income.

If you are self-employed, it may be hard to prove your income when making your case to the bank. This may be so for several distinct reasons. Nevertheless, banks must have some type of demonstration that you will be able to repay the loan.

To solve this problem, you can ask your accountant for a financial statement. The financial statement should be for the past six months. It is fundamental that the financial statement is filled out by your accountant because it will bring credibility to the statement.

One you obtain the final amount from your certified accountant, you treat the amount as a normal paycheck. You need to plug in that number to figure out the debt-to-income ratio which is the critical point of consideration to determine if the loan modification will be obtained.

By using this number, you discount the importance of business expenses, rentals, etc. Only the basic number showing your actual earnings is seen in the financial statement.

After you have completed this step, give this number to the lender. The number won’t be “audited” or “reviewed”. The bank can use it as proof as long as it is given by an accountant.

This is usually all the demonstration lenders require. Lenders will take this document as demonstration of earnings when the homeowner is self-employed. Because banks will use this documentation as proof of earnings, they need to make sure that this letter is coming from an accountant.

Remember that lenders expect to get some kind of proof of earnings prior to offering the loan modification. By providing the bank with the financial document done by your accountant, banks will obtain the documentation they need to give you the mortgage modification.

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