How do self employed borrowers apply for a Bank of America loan modification? Since there is usually no paycheck stub to send in, homeowners must prove their income to the bank in other ways. The tricky part of qualifying for a loan mod when you are self employed is knowing how to put together your Profit and Loss statement, and understanding how much income you need to report in order to pass the guidelines.
How do you figure your personal income when you don’t get a pay check? Self employed borrowers will be asked to provide business bank statements and a Profit and Loss Statement in order for Bank of America to verify their earnings. In addition, borrowers must itemize their personal household income and expenses on the RMA form. This information is then used to determine if the guidelines for income, expenses and assets have been met. The total of your business bank deposits for the last 6 months will usually be used for your Gross Business Income. The bank may ask for a Year to Date P & L, depending on the time of the year. You must also deduct any business expenses from your Gross Business Income to arrival at the NET figure.
- Average out your business income by adding your last 6 months bank deposits to arrive at your total gross receipts
- Deduct your business expenses for that same period-average out any annual expenses
- What is left over is your BUSINESS NET income, that figure then becomes your PERSONAL GROSS income.
- Input the personal gross income into the Loan Mod Calculator to find out if you are passing or failing the approval guideline
- If needed, adjust your business expenses in order to achieve the acceptable amount of income
Self employed borrowers must prove to Bank of America that their income fits right into the loan modification program guidelines-but keep in mind that you must separate your business income and expenses from your personal income and expenses. You can follow a simple P & L template provided in the Loan Mod Kit, and find out the best way to present your situation to the bank. Once you have your business expenses itemized, the NET business income will then be your PERSONAL gross income for the loan mod purposes.
Self employed borrowers do have a slight advantage over salaried borrowers, because you can adjust your expenses in order to arrive at the acceptable amount of monthly personal gross income. You can find out just how much income you should report by using the Loan Mod Calculator. This program was designed specifically to help homeowners prepare their application correctly. The Calculator will automatically compute and display PASS or FAIL for the 7 approval triggers, including income, expenses, assets, debt ratio, target payment, cash flow and Waterfall.
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