Mortgage Case Study: Home Loan for Restaurant Owner

When we spoke to him to better understand his situation, he explained his credit was overall good, he had two locations producing strong revenue and he was only looking for about a $300,000 to $400,000 loan and would pay the remaining balance in cash on another property he wanted to buy.

Since he was a business owner, we knew that mortgage underwriting would require two years of tax returns. When you are self-employed, a traditional mortgage will typically need two years of the personal tax returns and two years of the business tax returns. We discussed this with him, and reviewed his documents. While there was a good amount of revenue, he also had many deductions which were understandable considering he had rent, employees, advertising and food costs. These business expenses reduced his net profit and his bottom line did not show income enough to qualify for a mortgage.

Keep in mind that he also owned his current property, and had no plans to sell it. Even though that property was free and clear, he still had a monthly HOA fee and property taxes which had to be accounted for. In his case, the insurance was included with the condo HOA.

The bottom line was that he would not be able to qualify for a traditional mortgage.

Next, we examined his monthly revenue over a certain period of time. We noticed the monthly sales of even one location were large enough amount that we could help him. After reviewing one year's worth of business cashflow, we saw one single restaurant location was generating over $30,000 per month in revenue. This can easily be derived from funds being deposited into a business bank account. Credit card transactions, cash and even checks which get deposited into the bank account will get reviewed, analyzed and utilized to help the business owner, who in this case was a restauranteur.

Through a home loan program specifically designed for business owners, we could avoid tax returns and focus more on the business cashflow.

The $30,000 in average monthly revenue for a sole business owner could potentially qualify the individual as if they had $180,000 in income we can use. Depending on the person's liabilities such as car payments, personal loans and other debt that may appear on the credit, we can approximate that an individual in this situation could suddenly qualify for about a $600,000 to $800,000 loan without the need for tax returns. This certainly will vary from business owner to business owner as each individual has different credit, different liabilities, etc.

For this restaurant owner, he was focused on taking funds out of his current property to buy another. Since it was valued just below one million dollars and had no mortgage, he could easily take a few hundred thousand dollars from it, using the business cashflow we calculated, and use the funds to purchase another property. That's exactly what he did as we helped him obtain a self-employed home loan!

Here are some of the highlights to help understand basic criteria needed: