Online income and mortgage

5 replies
I have read quite a few people say that their income from IM pays for their mortgage, but would banks lend money to those seeking to mortgage a home to people who earn their living through IM?

I mean someone who has made $500,000 in a year can buy a house outright, but would banks lend to someone who earns the equivalent amount to a high school teacher? I get the feeling majority of online incomes (non-stores) are not seen as stable enough to be considered worthy of a loan to buy a house.
#income #mortgage #online
  • Anton,

    A bank or mortgage company will treat online income the same as any self-employment income. Lending requirements vary from state to state but in general banks want to see a consistent income over a 2-5 year period as evidenced by tax returns and bank statements.

    So in answer to your question, as long as a bank could see that you have been making a consistent income with your business (whether it is an im business or not) they will lend you money. In general banks scrutinize self-employment income much more than traditional income because it can be unstable and inconsistent.

    The FHA can give you some guidance on acquiring a mortgage if you are self-employed,

    FHA Loan Myths -- The Self-employed and FHA Loan Qualification

    Hope that answers your question,

    Shawn
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  • Profile picture of the author Anton543
    I see what you mean. Online income income is often very volatile and can change dramatically from one month to the next, which is not always the case with other self-employment work. The biggest difference I suppose is that most people who are self-employed do so under strict guidelines to meet various requirements (like tax filings, forming a company, and so on) to legitimize themselves as a as an entity and a going concern, but with online income its just often an individual who earns commissions and checks from various companies that can fluctuate a greatly one month to the next. They don't really operate a business, do they?

    Its like someone day trading the markets. There are no guarantees.
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  • Profile picture of the author Alex Blades
    Maybe they got the mortgage with a regular job and use IM money to pay for it. I can't see a bank loaning money based on IM Money because of the risks involved, but then again I am not a banker
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  • Profile picture of the author Merpati
    I would think that if you could prove your income over several months then there should be no reason a bank wouldn't loan you the money for a mortgage. There are also methods to cut your mortgage term way back without having to pay more each month.
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    • Profile picture of the author garyisonline
      If you are running IM as a legitimate business you will have the proper paperwork to back it up. They will look at your P&Ls, 2-3 years of tax returns and the last 3 months of your bank statements. Your earning potential will be scrutinized the same as if you owned a cabinet installing business.

      If you are running IM as a hobby, well...it's just additional income and your records will demonstrate that.

      Also if you earn $500K/year, you probably aren't going to buy a house outright. First of all, you will really only see around $200K flowing. And, a mortgage is money even the wealthy buy at 3.5% then turn and sell their cash to something more lucrative (investments, business growth etc) at...oh, around 6-8% or so.

      Cash sitting around is a bad investment. Risking all of your liquidity on one piece of real estate (even your own house) is a bad investment.

      Mortgages are a great cheap place to buy real estate backed money no matter what one's W-2 or stack o' 1099s say each year...then you or they can diversify the liquid into other nuts.
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