If you are a realtor and you want to get a mortgage, you may have been told that you either cannot get a mortgage or that you may have to get a mortgage through a B lender or a Private lender.
I am here to tell you that you have more options than just a Private or B. If you have been a realtor for a while, you may have registered your own Personal Real Estate Corporation (PREC). Your accountant may have suggested doing this in order to save on taxes within the last couple of years.
You don’t have a 2-year history
Now the problem you are likely being told that you are running into is that you may not have enough of a taxable income history. Whether or not a PREC will help you as far as obtaining a mortgage is concerned is not the topic of conversation for this post. If you have some questions about your numbers and how much you could qualify, you can reach out and book a call with me and I can help you figure those numbers out.
What we want to go over today is the general framework of how the financing is structured.
There are business-for-self programs that require a two-year history, which allow us to add back certain income that stays in your corporation and is not taxed as personal income. The personal tax rate is higher than the corporate tax rate, so if you have any money left over that you have at the end of the year then it might make sense for you to set up a corporate structure of some sort. I am not an accountant and this is not accounting advice, you need to consult with a professional to get advice on what is right for you.
Back to the topic at hand. So after you have the two years under your belt, and have filed taxes for 2 years, we can then use the program, and take an average of your taxable declared income.
But even now, even if you dont quite have the 2 years in your PREC, we can help you get a mortgage. And yes, with lenders on the A side with big banks.
As long as you have been in business for a min of 2 years, and we don’t quite have 2 years of the PREC, we can qualify your income.
We won’t be able to use the money that is staying in the corporation. Instead, what we could do is turn to a traditional 2 year average. We can use your taxable income from before and we can put it up against your first return in the PREC and then we will take a look at where you are year to date now inside your PREC. We will put all of this together and come up with a really good and compelling story for the lender. Now once again, the amount that you can qualify for is dependent on your individual numbers, and this post is not about that. If you would like a personal assessment you can reach out to me at any time.
But this is the basis of how we have been getting realtors approved right now for mortgages in this lending environment. It is possible, and just because you went into a PREC and just because you don’t have your two years, there are still a lot of options these days with the big banks.
What if you have a PREC for 2 years
Something to note, if you have your PREC set up for 2 years, and your Year to Date is trending for similar numbers as you have had in the past (there is not a huge increase or a huge drop off in your income year over year), and you are leaving money in the corporation. If you recall, earlier I mentioned that we would not be able to use any of this money left inside the corporation and count it towards your income? Well, in this case, we may be able to, there are some lenders that allow you to take corporate income and add back a portion of it on top of your taxable income. This can prove to be advantageous for those that do leave money inside their corporation. Once again, in order to determine how much you would qualify for, we would need to do a deeper dive. Please do not hesitate to reach out if you have any questions.