Bank of America has different requirements for loan modification approval when a borrower is self employed. Instead of supply 30 days worth of paychecks like salaried homeowners, business owners must be able to document their income in a different manner. Here are the basic steps to submit your loan mod application if you are self employed:
- Gross Monthly income is determined by what the NET business income on your P & L states. So, Business NET income equals Personal GROSS income for
- Do NOT mix up business and personal income and expenses. Your Profit and Loss should show you business bank deposits for at least 3 months-that total amount is then your Gross Receipts. Then deduct your business expenses for that same period-annual expenses can be prorated and listed. You can use an easy to follow P & L Template provided with the Loan Mod Calculator program.
- After deducting your business expenses – office rent, supplies, telephone, postage, payroll, etc-what is left is the Business Net-use that figure on the Bank of America RMA form as your personal GROSS monthly income. For example, if your P & L is for 3 months, then divide the net by 3 to arrive at your monthly figure!
- List your personal gross income and your personal household expenses on the RMA-items like groceries, utilities, etc. Don’t list the business expenses again as they have already been deducted on the P & L.
- Verify that the gross monthly income figures passes the Bank of America approval guidelines-if you list too much or too little income you will fail the Debt Ratio and Waterfall guidelines. Use the Loan Mod Calculator to compute your exact income requirements for you.
- If you need to adjust your personal gross income to PASS the Waterfall on the Loan Mod Calculator, go back to you P & L and make any necessary adjustments to your expenses to arrive at the acceptable bottom line number.
In some ways, self employed borrowers have a bit more latitude when applying and qualifying for a Bank of America Loan Modification. If you know ahead of time just how much income you need to report, you can make the needed adjustments on your P & L before submitting. Use the Loan Mod Calculator and easy P & L Template to help you get all of the figures right.