Mortgages hard to come by for self-employed

Small business owners and those who are self-employed are finding it more difficult than ever to qualify for loans now that stated-income loans have all but disappeared in the wake of the mortgage crisis, according to the New York Times. Stated-income loans had long been popular amongst these kinds of borrowers because they allowed lenders to use credit histories and earnings estimated instead of pay stubs or W-2s to determine who qualified. But when the market tumbled, they were pegged as a culprit for making it easy for borrowers to falsely inflate their incomes in order to buy properties they couldn’t actually afford. The self-employed borrower now must apply for conventional loans by submitting two years of tax returns, but mortgage brokers say the that’s a long-shot, especially when many self-employed people are taking business deductions because of the recession, which diminishes their official income levels. [NYT]