Alternative Home Financing Options in a Post-Covid Economy

The real estate environment across the Bay Area has shifted. The lingering effects of the pandemic have reshaped the landscape of real estate financing, posing unique challenges for buyers and sellers. This is particularly pronounced for those who are self-employed, business owners, and contractors, who find themselves navigating a financial terrain that has always been challenging for them. Furthermore, many have found themselves impacted by Traditional bank lending has tightened lending criteria, making it one of the most difficult periods in recent history to secure a loan. However, there are some alternative home financing options that could make your dreams of homeownership or real estate investment in 2024 a reality.

Don’t lose hope. Let’s review a high-level breakdown of financing options that might be the right option for your 2024 real estate purchase.

Profit and Loss Statement Mortgage

If you are self-employed or a business owner, traditional mortgage applications can be challenging without conventional proof of income in the form of a W-2 or paystubs. Profit and Loss Statement Mortgages can be an excellent alternative. They are specialized mortgage loans
that use a profit and loss statement prepared by a CPA as income verification.

P&L Statement Mortgages are a practical option for self-employed individuals in the Hayward, CA real estate market, enabling them to leverage their business financials effectively for property investment. Borrowers must have been in business for two years and have a
significant down payment. It’s important to start working with your mortgage broker early in the process so they can identify potential hurdles and help you resolve them.

Bank Statement Mortgage Loan

Instead of relying on tax returns, W-2s, or pay stubs, Bank Statement Loans use 12 to 24 months of personal and business bank statements to determine income. Eligibility can include a history of self-employment (typically two years), a decent credit score, a low debt-to-income
ratio, and proof of liquid assets.

Bank Statement Loans are ideal for self-employed individuals who might not have a steady income or utilize business write-offs that reduce their taxable income. The bank statement method allows them to demonstrate financial stability and income through their bank activity. These loans could allow applicants to qualify for higher loan amounts than other lending products.

Asset Depletion Mortgage

You don’t necessarily need any income to qualify for a real estate loan. If you have considerable assets but don’t want to use them all to purchase a home outright, you could be eligible for an Asset Depletion Mortgage.

In an Asset Depletion Mortgage, lenders calculate your monthly “income” by dividing your total liquid assets by 360 months, the typical duration of most mortgage loans. This method allows you to demonstrate financial capacity to cover the loan and regular living expenses without needing regular employment income.

An Asset Depletion Mortgage is a great option for borrowers with significant assets but who don’t have verifiable income. Not all assets qualify for these loans. Eligible assets usually include checking and savings accounts, money market accounts, CDs, stocks, bonds, mutual funds, and certain retirement accounts.

Traditional financing methods are just one of the paths to purchasing a home or investment property. Alternative financing options exist and primarily cater to self-employed individuals or business owners. Email me for a referral to a mortgage broker who can help you with alternative financing solutions.

If you’re ready to embark on your property search in the East Bay market, I’m here to guide you every step of the way. I’m committed to helping you navigate this challenging market and achieve your 2024 real estate goals.