subject: Self Employed Borrowers seeking a Loan modification [print this page] Self Employed Borrowers seeking a Loan modification
If you are one of the many people in the country who are self employed and do not use Quick books or an account to keep track of your monthly business expenses. You may want to consider doing so in the future, your accountant would probably appreciate it and secondly it's good business sense to keep track of your business income and expenses in a nice organized fashion. In regards to applying for a loan modification, if you are self employed you will need to provide a 3 or 6 month profit and loss statement. The lender will require this in order to underwrite your file. You can do this simply by taking your monthly income from business minus your monthly business expenses and average the total over the number of months.
For example:
Total business income for 3 months = $12,000.00
Total business expenses for 3 months = $2,000.00 (minus)
Total: $ 10,000.00 (divide by # of months) 3 =
Monthly average income: $3333.33
So if the lender is looking for a 6 month profit and loss, you would do the same calculation but over 6 months. If you do not have a profit and loss statement you can ask if your lender can provide one or you can make one in a word format. Some do it yourself loan modification companies will have samples you can download and use. When applying for your loan modification it is always a good idea to ask exactly what the lender will require. Sometimes they may actually even want a year to date profit and loss.
It is important no matter what the format may be especially if you prepare the profit and loss yourself to make sure you sign and date the document. A good thing to keep in mind as well is to keep your home expenses separate from what you may include as business expenses.
Underwriters will want to see clearly what is being used as business expenses, so in other words do not include your personal home cable, internet, and food as business. It is however, different if you work out of your home, but use common sense after all the underwriter is still going to look at your business and personal tax returns. The lenders do have to follow the HAMP guidelines to determine if you may qualify for the Home Affordable Modification program or any one of the governments housing loan modification programs.
