Can I Sign Connecticut Banking Work Order

How do i industry sign banking connecticut profit and loss statement

to the club hi this is steve shappert with connecticut real estate we're here today with siriani hotstetler of sharpline accounting and we're talking about getting mortgages for self-employed people so siriani what's the outlook for self-employed people looking for a mortgage these days hi steve glad to be here well um it's always been a little bit tougher for staff and for borrowers to get a mortgage application done or approved compared to traditional w-2 um people that are applying for mortgage um and also in response to kovit 19 mortgage giants that like fannie me and freddie mac have raised the bar for the self-employed borrowers and their additional people requirements okay it always kind of annoyed me that you know i own the business i can hire somebody they would get two weeks of paychecks from me and they can run off and get a mortgage but i wouldn't thank god so what are some of the new paperwork requirements uh that the mortgage companies have well because of the additional paper paperwork requirements it's even more important to have the right kind of documentation lenders typically would require uh two years of income tax returns showing consistent income bank statements uh profit and loss statements that show revenues expenses and net income so far uh in 2020 and also you you would need a business license and a letter from a cpa verifying that you've been in business for the past 24 months and for businesses that have less than two years in self-employment you would provide additional employment information and of course the credit report just like any other borrower would have okay so um papers that they're looking at most important ones probably the profit and loss statement does that sound right yes so what exactly do they look for in a p l okay if a profit and loss of p r shows uh revenue and expenses of the business result and the resulting net profit specifically over a time period like a month or a quarter or a year and the main purpose of a p l is to confirm that the file business return with the irs is stable and and in also increasing since the last tax filing um so typically what they're looking for will be they want they want to actually assess the where the cost the gross sales cost of goods sold net revenues um or rather net profit are in line with the previous year's business tax return that's pretty much what you're looking for but there is also another option there's another loan program called the bank statement loan program and lenders that offer this program uses your average bank deposits over a 24 month period now this could could be better for businesses that are thriving and have substantial bank deposits in in the bank and also have written off a lot of their expenses on the piano so the piano might not show as much net profit however they do have substantial cash flow and deposits in the bank account and could sustain could typically put a higher down payment with a high interest rate yeah i've heard that the uh the lenders for those type of loans the lenders kind of just use a average percentage so they'll look at a contracting business they'll look at all of the income that comes in and they'll take a ratio or an average and apply it because they know that everybody well let's just go there kind of plays with the books a little bit in terms like keeping the profits low but on average the irs can kind of like look at different businesses and different industries and say this business is going to have a 25 profit this one's going to have a 35 profit so they just kind of look at the gross income apply the percentage and then come up the loan amount that way yeah i'm i'm sure there's a lot of metrics that they use and best do to to um you know get the feedback from your underwriter because i'm sure it's a case-by-case basis as well plus obviously they would look at where your your business has uh your profit profitability over the past few years in order to use this uh this option okay so it really comes down to ratios right it's you know it's debt and income so what ratios are mortgage underwriters looking at um the dti ratio which is a debt to income ratio is typically what mortgage lenders would would kind of focus on as one of the ratios that will be focusing what is usually required as a dti about 43 or less and you can have a low dti by um kind of being um diligent about your your debt avoiding any new debt or avoiding opening any new lines of credit and also maybe putting on a higher down payment obviously so that you can have a mortgage a lower mortgage payment or consider a less expensive home and another thing is keeping your debt to ratio income that income ratio low can help you qualify for a home loan and also maybe open up other borrowing opportunities and it shows just your diligence and and responsibility overall okay yep responsibility is good so uh i've heard about things called at excuse me ad bags and gross ups could you tell me a little more about that okay so lenders typically understand that a self-employed client's income tends to be higher than what is reported on a tax return and higher because of a non some of some of them might have non-taxable income like social security disability life insurance child support payment and so on so using this gross stop income uh means that they would add that non-taxable income onto their mortgage application so as to get and um um increase the like lively likelihood of them getting approved and you know most mortgage lenders like fha and fannie mae freddie back were um you know encouraged to even allow for this gross up on your amount so that could be over over um a larger amount obviously that could increase your chances as far as add that goes is uh deductions that you take on your tax return that you can add back as well like depreciation and business mileage um that you might consider to uh pay a little bit more taxes by not taking these deductions but extending or you know improving your likelihood of a loan application being approved because you you really don't have to take every allowable deduction on the irs tax code so if you don't take a business mileage then you pay higher taxes but then that could significantly increase um your overall income to be more favorable and obviously it depends on case-by-case basis and you need to talk to your tax accountant and a mortgage lender for feedback yeah and and it makes your income actually look a little more similar to say your spouse's that has a day job because your spouse may drive 45 minutes to and from work every day and they may make x dollars a year and go oh look how much money i'm making versus how much money you're making but i get to deduct all of my mileage and they don't so correct and i'm sure with certain kinds of business that could be of factors businesses that rely on transportation and mileage to deduct to get a favorable net profit per tax return then it could make sense for them not to take that mileage pay a little bit higher taxes and and then apply for a higher mortgage i mean a higher likelihood of being approved for a mortgage due to a higher income and again it all goes down to just consult your tax accountant on your mortgage lender because it's a case-by-case basis and some business owners might you know very well do well with this um with this area with adding back their expenses versus other mortgage borrowers yeah right so in this whole whole new world of covid nonsense it's really at a point of do or die for business owners you're either going to thrive or you're going to die and that's just the hard cold reality so we're all working hard but we need to work a little smarter so how can we get some help you know like with our books in particular because you know we're working all day long seven days a week doing what we know but most of us got into business because we knew a specialty and we did that but we didn't realize that once we're business owners that you know what the majority of what we have to do is business like all the artists that i help they're like well can i just make art and it's going to sell mystically it will sell and and i'll make money so how can we get help what's going to make our lives easier well as far as financial records are concerned i can't very i can't advise you on the running the business aspect because it depends on what you're doing for a business but one huge major thing that can help you on growing on your business is to spend less time in your business and that's by having proper financial records and the best way to put your records financial records in order and easy access is through accounting software there's so many out there and you know quick and quick uh quickbooks being the most well known by their fresh books as xero their stage and these are just for small businesses and startups mainly there's a slew of other software's out there depending on your need and the size of business i'm sure there's a few quite several of them that um i'm not even aware of um so as long as you can get your financial records in order and easy access you're all you're all that's pretty much a lot of the battle there is because then you can grow your business grow your business and know where you are heading and on top of that when it comes down to a mortgage application process you have it all neat and tide out and be able to apply with not a lot of hassles now you could very well train yourself on this accounting software but if you don't have time or have the inclination to learn then um you might want to consider employer account applying an account and a bookkeeper to help you through the fraud process so that you can streamline your financial records uh much more easily and more accessible accessible okay so uh you know we're shooting a video here on self-employed people getting a mortgage and what i've noticed over the years when it comes to videos is that people love tips and tricks so siriani you got any tips and tricks for self-employed people looking to get a mortgage okay so well the most basic things and we do know that but needs to get reinforced is be realistic about your finances especially if you have a debt to manage and get into some kind of maybe a debt management program or just some routine of paying them paying your debts down before committing to a market create some consistency way before if you even go through that process so that by the time the time by the time comes you already have somewhat of a manageable manageable debt that you can present to your mortgage lender and you could also try again for after a few months in these harsh economic times maybe you need to rebuild your business that's okay you might need to have a few more months of rebuilding your business before trying again and i believe because of the economic conditions now the the typical um locking the rate as soon as possible i don't think that quite apply now because it's probably not going to be that critical to lock in the rates due to the low rate so um you know again consult your mortgage lender on this but i would say that we have the advantage of time to rebuild ourselves and still get hopefully favorable terms next year even if we wait for it for a little while trying to get our finances in over in order and most importantly i say work with an accountant or bookkeeper if you're not capable or have any inclination to manage your finances or need help in any any way because not only your accountant or bookkeeper can help streamline your finances but they can also be a trusted advisor whereby they can guide you on the best timing and scenario possible when it comes down to applying for our markets okay you sound very knowledgeable siriani can people get a hold of you do you have a website yes my website is www sharp line accounting services one word sharp s-h-a-r-p-l-i-n-e sharp sharpline accountingservices.com and my number is 203-918-8875 against 203-918-8875 i've been in business for six years recently left my corporate accounting job just last year to make to do full-time in to immerse myself full-time in my business i provide bookkeeping and accounting solutions for small business owners and i'm able to help with anything from quickbooks setup to managing your bookkeeping all the way to financial statements preparation whatever that a small business needs in terms of um accounting and financial needs um fantastic so you're an actual cpa that chose to work as a bookkeeper to help us little guys so to speak well yeah contrary to what people say cpas could provide pretty much a full scope services so my advantage is that i'm not just a bookkeeper i can help with someone that starts their business but my edge is that i can go soup to nuts and what whatever the range that the client needs they might need something a starter for example might not need just monthly bookkeeping and we'll be to that level until they grow their business a little bit and have a little bit more clients and want to see hey where am i going profit-wise do i need to do i need to um you know consider having another business line or how's the profitability for this one versus that other one uh where do i need to go then i could at least guide them that way when they get to that point and all the way to you know overall analytics and their performance ratios their trends um so i i believe that with my experience my 15 years experience in corporate accounting i i've worked with a number of industries small and medium-sized businesses and also uh two big four cpa firms way back way back in my uh initial journey so i've seen a lot of industries and i've seen a lot of corporate accounting work now i can use that to help small business owners because really small business owners needs are not as complex but they're still critical so i'd like to be the person right in front of them to to help them from like i said soup to nuts or anything like a full scope financial service or whatever they need even on a startup basis sounds great siriani thank you so much for your time we should have this up on the cloud in just a few minutes have a great day everyone okay thank you bye bye