The self employed borrower does in fact get a bit more scrutiny from a lender when applying for a mortgage. Not necessarily because the self employed are more inclined to fudge any numbers but because the verification process takes a few more steps. Someone who receives a W2 form each year from their employer has their income verified three ways; from a recent pay check stub, the W2 form and copies of their tax returns.
A self employed borrower will also have their tax returns reviewed but will also have their business bank statements evaluated. If a business shows a $10,000 per month in income and the self employed borrower puts that amount on their application the business bank statements should reflect approximately $10,000 in monthly deposits. If the borrower can't provide bank statements that show a deposit similar to the income on the application the lender may not approve the application.
Business bank statement scrutiny doesn't end there. Sometimes a self employed borrower will take funds from the business bank account to help qualify for a home loan. If the borrower needs $10,000 for a down payment the borrower can tap into his business funds, right? Not so fast.
When a borrower uses business funds for personal use the lender wants to feel comfortable that the cash withdrawal won't harm the operation of the business. Businesses need money for business expenses and operating funds. What would happen if a borrower took out $10,000 to help buy a home and those funds were needed to pay employees instead? Would the business shut down? Would the business see a reduction in income over the next several months?
When personal use of business funds occurs, a lender will want to see some reassurance that the withdrawn funds won't affect the business negatively. Most often this assurance comes in the form of an accountant's letter stating simply ทาวน์โฮมมือสอง that the withdrawn funds won't affect the business. Using business funds for personal use is okay; a lender just wants to make sure the source of income won't shut its doors.
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