You can get low mortgage rates in Chicago in July 2020. Interest rates in the Chicago area for a 30-year conventional mortgage are close to 3% . You should be thinking about refinancing. Even if you’re self-employed and hear it is harder now, because of Covid19, to get approved.
Because unemployment is high, lenders have added extra steps to the process of getting a loan. They really want to make sure your income has not gone down because of the pandemic.
Income Documentation Required
It used to be that you would produce tax returns and, maybe, YTD financial statements and you were good to go if you owned a company. Lenders just checked your incorporation date on the State’s website.
If you did not own a company, they wanted a letter from you accountant or tax preparer stating how long you’ve been in the line of business you were in.
Now, they want to see bank statements that match the profit and loss statement. If you’re not providing business bank statements, you now have to provide audited YTD financial statements. And that’s true even if you have just filed your tax returns.
So, think ahead if you want fast approval and low mortgage rates in Chicago. That means
- you either provide your mortgage specialist an-audited YTD financial statement and business bank statements or
- you do not provide bank statements from the account you use for your business but have audited financials.
And I mean, with your application.
And yes, self-employed people still have to provide:
- Business tax returns from the most recent two years (one year for some, depending on length of self-employment).
- Tax transcripts (for personal taxes, you can download them yourself from the IRS website; otherwise, you fill out a 4506-T form)
- Proof of assets. Bank statements for the previous 2 months. If you have retirement and investment accounts, make sure you provide them. You speed up things if you provide the rules under which you can access the funds. Lenders want to know that you can get them any time you want and the price of taking them out.)
- If you have additional income, documentation that details how much and for how long.
One of the things I see often on tax returns, people who do not use depreciation though they should. It happens that someone who started out leasing a truck buys his own. And informs the tax preparer of miles but forgets to mention that this time around, they own the truck.
Or they prepare their own taxes and do not think of depreciation.
Depreciation reduces your tax liability but not your income. You’re wise to depreciate on your tax returns assets that can be depreciated.
Get Low Mortgage Rates for Chicago Area’s Self-Employed
To get low mortgage rates,you have to prove that your business is sound despite the pandemic. And, as always, having all your documentation ready from the beginning makes for a smoother and faster process.
Interest rates are always a bit higher for cash-out refinances than for rate and term refinances and purchases. No, lenders do not care that you’re going to be using some of the money to remodel the home and the rest to give your daughter’s favorite Chicago wedding shop a down payment on that very expensive dress she loves or for any other good reason. Cash-out refinances are riskier, they say, so they charge higher interest rates.