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#42 Self-Employed? Here’s a 5% Down Mortgage Option You Should Know About · Own More Doors

• 0:00
  SPEAKER_01: What's up everyone?
• 0:00
  SPEAKER_01: Juan Weezar here with the Own More Doors Podcast.
• 0:03
  SPEAKER_01: This specific episode was first shared on our YouTube channel, Sage Real Estate.
• 0:08
  SPEAKER_01: Check it out.
• 0:08
  SPEAKER_01: And we're excited to bring it to you here.
• 0:11
  SPEAKER_01: We hope you enjoy the interview.
• 0:13
  SPEAKER_01: This video is for all the business owners out there.
• 0:15
  SPEAKER_01: I applaud you.
• 0:16
  SPEAKER_01: I know it's risky to own your own business, but we're going to show you today how, as a self-employed person, you can go ahead and qualify for a loan, a house with 5% down.
• 0:26
  SPEAKER_01: This program is new, it's been adjusted.
• 0:28
  SPEAKER_01: And watch this video to learn more.
• 0:31
  SPEAKER_01: Hey everyone, it's Juan Weezar.
• 0:33
  SPEAKER_00: And Phoebe Tadoroff with Sage Trust Mortgage.
• 0:36
  SPEAKER_01: Today we're going to be diving into your self-employed.
• 0:39
  SPEAKER_01: How do you go about financing property?
• 0:41
  SPEAKER_01: Because it's always tricky, right?
• 0:42
  SPEAKER_01: You're self-employed and you call me and you have a lot of money.
• 0:46
  SPEAKER_01: And the conversation goes like this Hey Juan, I run this type of business, but my taxes don't look so great.
• 0:53
  SPEAKER_01: Okay, I get this all the time.
• 0:55
  SPEAKER_01: So this might be you, right?
• 0:56
  SPEAKER_01: Today, Phoebe's going to tell us this new loan program specifically for self-employed.
• 1:01
  SPEAKER_01: I'm excited to learn about it, so let's hop right into it.
• 1:04
  SPEAKER_01: Sounds good.
• 1:04
  SPEAKER_01: Phoebe, so just take it from the top.
• 1:06
  SPEAKER_01: What why is this program unique?
• 1:08
  SPEAKER_01: Why is it special?
• 1:09
  SPEAKER_01: And why does it benefit our self-employed people out there?
• 1:12
  SPEAKER_00: So it's not a super new program.
• 1:14
  SPEAKER_00: However, they've come out with additional options with lower down payments.
• 1:19
  SPEAKER_00: So we call it the bank statement program.
• 1:21
  SPEAKER_00: It's geared towards the self-employed individual who has really good deposits monthly into their business accounts andor personal bank accounts, but doesn't claim a whole lot of money on their tax returns or income.
• 1:38
  SPEAKER_01: Which is a lot of business owners.
• 1:39
  SPEAKER_01: A lot of business owners.
• 1:40
  SPEAKER_01: A lot of business owners owners covers them.
• 1:42
  SPEAKER_01: Okay.
• 1:42
  SPEAKER_00: Yes.
• 1:42
  SPEAKER_00: Or they have a lot of expenses.
• 1:45
  SPEAKER_00: You know, they have decent income, but a lot of expenses.
• 1:47
  SPEAKER_00: So the net on their tax returns is not quite enough to qualify for a mortgage.
• 1:51
  SPEAKER_00: So that it's called the bank statement loan.
• 1:53
  SPEAKER_00: It is considered what we call a full documentation loan.
• 1:58
  SPEAKER_00: However, they've rolled out programs lately that require only a 5% down payment, which is huge.
• 2:04
  SPEAKER_00: Those those types of loans required at least 10%, usually closer to 20%, because they were using your income to qualify for the mortgage.
• 2:14
  SPEAKER_01: And is this for your personal residence?
• 2:16
  SPEAKER_00: It is for a primary residence.
• 2:18
  SPEAKER_00: It can be used for primary residents, and that's gonna requ allow the 5% down.
• 2:22
  SPEAKER_00: If you want to use bank statements for an investment property, you're gonna have to put at least 10% down.
• 2:27
  SPEAKER_00: However, I'm gonna ask.
• 2:29
  SPEAKER_01: Okay.
• 2:29
  SPEAKER_01: I'm gonna ask because someone's gonna be like, okay, okay, but but Juan always talks about buying a fourplex.
• 2:34
  SPEAKER_01: And so what if I live in the front house?
• 2:36
  SPEAKER_00: Yeah.
• 2:36
  SPEAKER_01: Can I do 5% down?
• 2:38
  SPEAKER_00: On the four units, yes.
• 2:40
  SPEAKER_00: But it needs to be owner occupied.
• 2:41
  SPEAKER_00: So so long as you live in one, yes, and you don't own a home, a single family residence elsewhere.
• 2:47
  SPEAKER_01: You you you can't be trying to trick the bank, okay?
• 2:50
  SPEAKER_01: So nice try, but it's tough, okay?
• 2:52
  SPEAKER_01: So let's just let's what we're saying is play by the rules.
• 2:55
  SPEAKER_01: If you're legitimately gonna live in it, you you can do it.
• 2:57
  SPEAKER_00: Yeah, okay.
• 2:58
  SPEAKER_00: And you can be a first-time home buyer as well.
• 3:00
  SPEAKER_01: Okay.
• 3:01
  SPEAKER_01: So um the 5% down is great.
• 3:05
  SPEAKER_00: Yes.
• 3:06
  SPEAKER_01: And the fact that, and so what you were saying is that in the past they had bank statement loan programs for self-employed people, but they had to put more of a down payment.
• 3:17
  SPEAKER_00: Correct, correct.
• 3:18
  SPEAKER_01: Um, so now it's less, which is great.
• 3:21
  SPEAKER_01: Someone watching is gonna say, what's the catch?
• 3:24
  SPEAKER_01: And my question is, what's the catch?
• 3:26
  SPEAKER_00: Um there isn't is the interest rate higher?
• 3:29
  SPEAKER_00: Oh, yeah, of course.
• 3:31
  SPEAKER_00: So sorry, that is the catch.
• 3:32
  SPEAKER_00: The interest rate is gonna be higher, and they're gonna have options to have PMI, which is gonna have a little bit lower of an interest rate, or no PMI, which is going to have a little bit higher of an interest rate if you put less than 20% down.
• 3:45
  SPEAKER_01: Got it.
• 3:45
  SPEAKER_01: Okay, so PMI property mortgage insurance, and so um in some cases you could settle for a slightly higher interest rate and not have to worry about that payment.
• 3:56
  SPEAKER_01: But that's you don't have to worry about that for now.
• 3:58
  SPEAKER_01: I think if you reach out to Phoebe, she'll say the no PMI option is this and the PMI option is this, and at the end, all you're gonna say is, well, which one costs less?
• 4:07
  SPEAKER_01: Is I think what you're gonna come up with.
• 4:09
  SPEAKER_01: And is there primarily a way, like is it is it going with the higher interest rate is always cheaper, or is there like a rule of thumb?
• 4:17
  SPEAKER_00: It no, because the the PMI is going to be dictated, or the amount of the PMI is gonna be based on property type, credit score, and down payment.
• 4:27
  SPEAKER_00: So it you know, the PMI could be very, very high if you have a lower credit score with only 5% down, right?
• 4:33
  SPEAKER_00: Or if you have a you know very high credit score and you're putting 10 or 15 or 20% down on that type of loan, which is allowed, the PMI is going to be lower with less than 20% down.
• 4:43
  SPEAKER_01: So someone watching might be like, hey, 5%'s good, but Phoebe, if I do more, can I get a lower interest rate?
• 4:49
  SPEAKER_00: Yes, yes.
• 4:50
  SPEAKER_00: So every 5% of down payment is going to improve your interest rates.
• 4:55
  SPEAKER_01: Okay, okay, so that's so that's really good to know.
• 4:58
  SPEAKER_01: So um, can you give us an idea on what on average no one's gonna hold you to this?
• 5:03
  SPEAKER_01: Like if they're watching this six months from now, interest rates change all daily.
• 5:07
  SPEAKER_01: So I'm just saying for now, for those watching, it's um March 21st, 2025.
• 5:14
  SPEAKER_01: For this type of loan, like what are you saying?
• 5:16
  SPEAKER_00: Um, so I actually am working on right now pre-qualifying uh a client.
• 5:21
  SPEAKER_00: Um, she is looking at a single family home.
• 5:24
  SPEAKER_00: She has a very high credit score, she is self-employed.
• 5:28
  SPEAKER_00: Um, she is looking to put 5% down, and her interest rate that I quoted her on Thursday was 7.625% on a 30-year fixed mortgage, and that's with the PMI option.
• 5:42
  SPEAKER_00: And I actually don't recall, but I think the PMI it fluctuates based on the loan amount and the property type.
• 5:49
  SPEAKER_00: So um it did have PMI.
• 5:52
  SPEAKER_00: That was the PMI option that she was looking at, but it was a 30-year fixed mortgage with no prepayment penalty.
• 5:59
  SPEAKER_01: Someone listening to this is gonna say they're gonna fall over, they're not gonna believe that someone would sign up for an interest rate of seven 7.625.
• 6:07
  SPEAKER_01: But understand this if you have a job in your W-2 and you have the salary, and and and if you qualify the traditional way, the conventional way, this is gonna be shocking to you.
• 6:23
  SPEAKER_01: But folks, this this video is for the people who cannot go the traditional way.
• 6:29
  SPEAKER_01: So this is like, hey, we have no other option.
• 6:32
  SPEAKER_01: And a lot of times self-employed people don't have that option.
• 6:35
  SPEAKER_01: So again, 7.625 is what was quoted this past Thursday.
• 6:40
  SPEAKER_01: Um it's not crazy to the business owner who says, I didn't qualify for the conventional loan anyway.
• 6:47
  SPEAKER_00: They're unable to get a loan, period.
• 6:49
  SPEAKER_00: So it's it works for them and the payment works for them.
• 6:53
  SPEAKER_01: I like the fact that it's uh 30-year.
• 6:56
  SPEAKER_01: Is is there um I'm gonna ask, is there any interest only option on this?
• 6:59
  SPEAKER_00: Not on the bank statement program because it's considered a qualified mortgage, so yeah.
• 7:04
  SPEAKER_01: Okay.
• 7:04
  SPEAKER_01: Versus versus we did a video on DSER, which is a non-qualified mortgage.
• 7:08
  SPEAKER_01: This is qualified mortgage.
• 7:10
  SPEAKER_01: And so this one just um if you if you have a business and a lot of large deposits go into the business, um, can we describe what large is?
• 7:19
  SPEAKER_01: I mean, my version of large might be very little for someone much bigger, right?
• 7:22
  SPEAKER_01: I I don't know.
• 7:23
  SPEAKER_00: Well, so they're they're gonna look at the last the minimum is 12 months of bank statements.
• 7:28
  SPEAKER_00: Uh, you get better interest rate and terms if you provide 24 months of bank statements and they work.
• 7:35
  SPEAKER_00: So the amount of deposits need to so if if and then there's different types of calculations.
• 7:42
  SPEAKER_00: There's gonna be one calculation if you're using business bank statements, there's gonna be another type of calculation if you're using personal bank statements, and you can use a combination of the both as long as you're not moving money back and forth between the two different accounts.
• 7:56
  SPEAKER_01: It's the same, it's the same money, and you're trying to count it twice.
• 7:59
  SPEAKER_01: Guys, come on.
• 8:00
  SPEAKER_01: It's a nice try, but but you're not gonna trick us, okay?
• 8:02
  SPEAKER_00: But there's a lot of business owners that put some income into the business account and then deposit different types of income into their personal account, and it's completely separate.
• 8:12
  SPEAKER_00: So if that's the case, they're going to allow both types of bank statements to be used.
• 8:17
  SPEAKER_00: Um, and it it's a little difficult to describe how, but typically what they're going to look at is all of your deposits done over either 12 or 24 months.
• 8:28
  SPEAKER_00: They have different vacant, no, I'm sorry, not vacancy, they have different expense factors.
• 8:34
  SPEAKER_00: So if say you deposit$10,000 a month, depending on your credit score, your down payment amount, and what type of business you run, there's different levels of expense factors.
• 8:48
  SPEAKER_00: So let's just say if you're, let's just do with a 25% expense factor.
• 8:54
  SPEAKER_00: So depending on your situation,$10,000 every single month has been deposited in the last 12 months, right?
• 9:01
  SPEAKER_00: So they're gonna do$10,000, they're gonna minus out a 25% expense factor.
• 9:06
  SPEAKER_00: Okay.
• 9:07
  SPEAKER_00: Equally, so now your qualifying income is going to be$7,500 a month.
• 9:12
  SPEAKER_00: So as long as your entire mortgage payment, including insurance taxes, and PMI, if you choose that option, does not exceed 50% of the$7,500, which is$37.50, you're gonna qualify for that mortgage.
• 9:25
  SPEAKER_01: However, reminder, what was the percentage you got you said?
• 9:28
  SPEAKER_01: 50%.
• 9:29
  SPEAKER_01: 50%.
• 9:30
  SPEAKER_01: 50%.
• 9:30
  SPEAKER_00: However, remember your consumer debt is also going to be taken into account in that qualifying, unlike the DSCR loan.
• 9:37
  SPEAKER_00: So um the bank statement is like a traditional mortgage, however, the way that they calculate the income is different.
• 9:46
  SPEAKER_01: Phoebe, um we know you could do loans for this one um throughout California.
• 9:54
  SPEAKER_01: So anyone watching California, uh, my question is can you do this type of uh bank statement loan outside of California?
• 10:00
  SPEAKER_01: Yes, in certain states.
• 10:01
  SPEAKER_01: In certain states, yes.
• 10:02
  SPEAKER_00: Okay, so and just reach out to me and let me know what state.
• 10:05
  SPEAKER_00: But remember, this is an owner-occupied option.
• 10:07
  SPEAKER_00: So if you're looking to buy out of state, your business needs to be portable to work in a different state.
• 10:14
  SPEAKER_01: I was just thinking someone lives in Ohio is a fan of our show.
• 10:18
  SPEAKER_01: Thank you so much.
• 10:19
  SPEAKER_01: And they're a business owner.
• 10:20
  SPEAKER_01: Yes, and they're saying, hey, can Phoebe do my loan?
• 10:22
  SPEAKER_00: Yes.
• 10:23
  SPEAKER_00: Well, I don't know if Ohio, I don't have the list here in front of me, but yeah.
• 10:27
  SPEAKER_01: We'll we'll try to create a list and then we'll have it down in the description by the time this video comes out.
• 10:33
  SPEAKER_01: And and so that you know that if you're like, hey, I I trust these two people, I would I would love for Phoebe to do the loan, then that would be great for them to just look, okay, it covers this state, and then you could reach out and again, primary residence, um, and you're a business owner, and you and you don't qualify.
• 10:52
  SPEAKER_01: If you qualify your traditional route, go to the traditional route.
• 10:55
  SPEAKER_01: You're gonna have a lower interest rate.
• 10:56
  SPEAKER_01: We're not forcing you into this direction.
• 10:59
  SPEAKER_01: We're we're simply saying you had no other options, anyways.
• 11:02
  SPEAKER_01: And so then this is a very good option.
• 11:04
  SPEAKER_01: Um, anything else that you want to cover with the slow?
• 11:07
  SPEAKER_00: So, what one other thing about this, you don't necessarily need to be a business owner.
• 11:10
  SPEAKER_00: Okay, right?
• 11:11
  SPEAKER_00: You can be an independent contractor who receives income via 1099.
• 11:16
  SPEAKER_00: Okay, okay.
• 11:17
  SPEAKER_00: So a lot of those people consider themselves business owners because they want to file a Schedule C.
• 11:22
  SPEAKER_00: However, um if you're getting paid by a company because you have a contract and you have those deposits, um, that's fine too.
• 11:30
  SPEAKER_00: They don't need to be generated organically from self-employed type of income.
• 11:35
  SPEAKER_00: There are people that receive contractual income on a 1099 basis, and you can use those deposits.
• 11:42
  SPEAKER_01: So this could be for all the artists out there, and you know, we have a lot of freelance people.
• 11:47
  SPEAKER_01: I'm not pointing anybody out, but so okay, so this is a great program.
• 11:50
  SPEAKER_00: It is a great program.
• 11:51
  SPEAKER_00: Yep.
• 11:51
  SPEAKER_01: Awesome.
• 11:52
  SPEAKER_01: Okay, um, anything else?
• 11:54
  SPEAKER_01: I'll give you the final say regarding this program.
• 11:56
  SPEAKER_00: One other thing, too.
• 11:57
  SPEAKER_00: So you can if you're looking to buy a two to four unit property with that program, it's gonna require more than five percent down.
• 12:04
  SPEAKER_01: However, you can use your deposits from your it's gonna require more than five percent down on the if if you go two to four, it's gonna require okay.
• 12:11
  SPEAKER_01: Yes, I got it.
• 12:12
  SPEAKER_00: So the the single family is gonna be the five top.
• 12:15
  SPEAKER_00: But yes, and I apologize if that wasn't clear earlier.
• 12:18
  SPEAKER_00: Um, but ten percent down for two to four units.
• 12:21
  SPEAKER_00: However, you can use your deposits from your bank statements, and you can use still use the rental income from the other units that you will not be occupying at a 75% of the actual or market rent, whichever is less.
• 12:36
  SPEAKER_01: Okay.
• 12:37
  SPEAKER_00: So that's that's also an option.
• 12:39
  SPEAKER_01: I love it.
• 12:39
  SPEAKER_01: Perfect, Phoebe.
• 12:41
  SPEAKER_01: I uh thank you so much for telling us about this.
• 12:42
  SPEAKER_01: And and I get it, it's not a new program, but they made some adjustments, it's gotten better, 5% down on single family homes, which is tremendous.
• 12:50
  SPEAKER_01: And and yes, you could apply it to two to four if you're gonna occupy one.
• 12:54
  SPEAKER_01: And that might be the route for you to go.
• 12:56
  SPEAKER_01: Again, if you're self-employed, 1099, this works for you.
• 12:59
  SPEAKER_01: So hope you learned a lot.
• 13:01
  SPEAKER_01: Send some comments, put some questions down below.
• 13:03
  SPEAKER_01: Make sure to like, comment, and subscribe.
• 13:05
  SPEAKER_01: Again, if you're interested in working with Phoebe, check out the website, um, contact her directly, and let's get you pre approved.
• 13:11
  SPEAKER_01: That's the very first step to knowing whether you're gonna qualify or not.
• 13:14
  SPEAKER_01: So, until next time.