Covid wiped out many small self-employed business owners, bringing the work-from-home culture we lenders and RE agents have enjoyed our entire careers.

Once you’ve been successfully working for yourself, most entrepreneurs don’t want to return to the “8-5”, fight traffic every morning/evening,  “drink the corporate Kool-Aid,” or answer to corporate clowns whose only agenda is to benefit themselves.

The rate is pricey, but so is paying the California state income tax of 13.3% (with current legislation pushing the rate to 16.8%). The Federal tax rate is between 10% and 37%. The social security/Medicare tax rate is 7.5%

Net tax payments can be reduced substantially with self-employed deductions, which are more numerous than those for salaried/ hourly

These Factors Determine a Borrower’s Interest Rates

With the economy on the mend, many entrepreneurs seek to
expand their current business, restart a former business, or begin another.

But how will they get seed money
when they show little or no taxable income?

HELOCs from banks and credit unions are “full doc,” so that’s to be an option, nor is refinancing their current home, as many homeowners currently have a 1st TD under 4%.

Stated Income Second Trust Deed
There is an alternative: a stated income second trust deed.

This is a niche loan product for current homeowners wishing to start or expand their current business and requires only minimal documentation with NO TAX returns.

Cash Out-2nd TDs

1) The loan proceeds can also be used for any business or to buy an investment property.

2) Rate: 9.99 – 13.99% depending on the CLTV, FICO, and current condition. Add to rate for borrowers with less than a 640 FICO score.

3) Max CLTV: 65% with a full appraisal.

4) Term: Fixed for two years, with 6-month prepay.

5) Payment options: “Interest Only” for 30-year amortization OR a 40- year amortization; the loan is fixed for three years, with a 6-month pre-pay.

6) Minimum Loan Amount: $100,000. The max. loan amount is typically $160k, but exceptions can be made-call for more details.

7) Proceeds: must be for either a current business, to begin a new business, or to buy an investment property. A letter of purpose must be submitted with an application.

8) A homeowner’s current 1st TD must have at least five years remaining, and the rate cannot be higher than 7.5% on the 1st  TD.

9) Fees and pts: $1,775 processing and funding fee + 4 points up to
$160,000.For larger loan amounts, call for a more precise quote as points decline for higher loan amounts,

10) Proof of self-employment: Business or professional licenses  A business license can be as recent as one week old.

Copywrite © August, 2018 Daniel Dobbs MHM Mortgage /// All rights reserved. No part of this publication may be reproduced, distributed, or transmitted in any form or by any means, including photocopying, recording, or other electronic or mechanical methods, without the prior written permission of the publisher, except in the case of brief quotations embodied in critical reviews and certain other noncommercial uses permitted by copyright law. For permission requests, write to the publisher, addressed “Attention: Daniel Dobbs, Author- VP-Broker Mutual Home Mortgage 265 S. Randolph #120 Brea, Ca. 92821 Cell: 949 250-3981 Dandobbs6@gmail.com NMLS #307631 BRE #00986886