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I run a small unlicensed home daycare. Right now I of course report all my income but I also right off quite a bit. I am having a hard time getting a lender to refinance our car loan because my income is not considered sufficient (because of the right offs). It only looks like I make a very very small portion of what I actually do. I have had this job for 4 years, have excellent credit so the only issue is that according to my tax return, it doesn't look like I have much income when I do. The lenders won't take into account that my bills are ALWAYS paid. We own our home, have been successful with numerous payoffs on cars, credit cards and other types of loans but none of this is enough apparently. Is there anything I can do to "prove" my income? or do a lot of daycare providers face this issue?
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I think that it is self employeed.... I have had another company for almost 20 years and in the last 5 years banks have almost made it impossible for business owners to take loans.... It totally stinks too... I have a good credit and the only way I was able to buy a new car was by using my tax returns and bank statements...Originally posted by cheerfuldom View Post -
Right, I am considered self employed but the annoying thing is that we just bought a huge new home and none of this was an issue with the home loan! But the refinance on a car loan was not happening. We had been loyal customers to this bank but they said no, a few others said no too so there is something different with a car loan I guess. It wasn't even a purchase.....just a refinance!Comment
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are they a smaller bank? i know that a lot of the banks have changed their rulesOriginally posted by cheerfuldom View PostComment
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CREDIT UNIONS, people! Banks are soooooo last decade. Find a local one that works within your community, and put your money there. Mine has every member as a shareholder (each account has an untouchable bottom limit like $5 which buys you a share in the company), and they are very good about loan terms and financing. Think of a bank as a money store- like Nordstroms...and a credit union like a thrift store.Comment
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You need two years good salary to show for (tax returns).Last edited by Michael; 04-08-2011, 03:12 PM.Comment
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This WAS a credit union! We also ran it thru a few other places but I don't know what the other places were, just that they all said no.Comment
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AND I have three years self employed income on my taxes from previous years. This is my fourth year.Comment
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I just had my taxes finished specifically to *qualify* for a refinance. I will pay $10k more in taxes for 2010 because of it. It's the cost of getting a loan today for the self-employed.
I asked my tax guy if I can resubmit my taxes after the loan is approved. It's a huge red flag because if there is ever a problem, the loan company will think I worked the numbers just for the loan.
And yes, I have excellent credit, have made the current payments for years on the income I have. The bottom line is what the *net income* on your taxes say.
Sucks, but sorry.Comment
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My MIL is a mortgage loan originator and she told me that, when underwriting a mortgage, the banks will usually look at home childcare provider's income as being more than the tax return because they understand the home office deduction is calculated so favorably, but that they don't do that for any other type of loan. This was before the housing meltdown, though, so I don't know if that's still true.
When we bought a car two years ago, we had to provide more documentation than we ever have with the credit union that we've used for years. It used to be basically just sign and drive, no questions asked. The lending climate is so much different now, I guess.Comment
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Thanks for all your thoughts. I realize about the "spendable income" but I have just been confused that it hasn't been a problem with anything (including a home loan) except this car refinance.Comment
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This is a terrible time to get any type of loan.
In general, you should argue that some of the expenses on your tax return should not be counted when applying for a loan, thus raising your profit. These include depreciation from line 13 on Schedule C and all your house expenses from Form 8829, since you are already paying these bills.
Some banks will go along with this thinking, others won't. You may need to continue to shop around til you find someone who will pay attention.
You may want to produce a monthly cash flow statement that shows where your income comes from and where the money goes. This is the best statement of your ability to pay off a loan.
I've written a chapter about applying for loans in my book Family Child Care Money Management and Retirement Guide.Comment
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Can't shopping around also go againist you? We have been shopping for a refi loan ourselves, and we go through the process of seeing what the bottom line mortage payment will be, so they they prequalify us in order to do that, and now because we have been shopping, now other lenders are telling us we have too many inquiries on our credit report lately! We just can't win! It doesnt seem fait that when you shop around, you get biten too!Originally posted by TomCopeland View PostComment
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To avoid the problem of too many credit inquires, ask the bank whether they will allow you to increase your profit by your depreciation and house expenses to determine your income before try to prequalify for the loan.Comment
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