The reason I find all this hard to believe is that a friend of mine who is a realtor went bankrupt in 2010, got caught with too many homes during the credit crisis then three or four months after his bankruptcy he got an unsecured credit card with normal rates from a major bank if, a self employed realtor can get an unsecured credit card with a fresh bankruptcy; why wouldn't a trader with good credit history and a descent K1 or 1040 get a loan?
Is it hard for traders to get loans/credit?
- Thread starter dv4632
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The reason I find all this hard to believe is that a friend of mine who is a realtor went bankrupt in 2010, got caught with too many homes during the credit crisis then three or four months after his bankruptcy he got an unsecured credit card with normal rates from a major bank if, a self employed realtor can get an unsecured credit card with a fresh bankruptcy; why wouldn't a trader with good credit history and a descent K1 or 1040 get a loan?
I know at my bank they are pretty tight with lending and have slightly higher rates than competitors , was wondering if I would be better off skipping them altogether to get "pre-qualified" and go to a mortgage broker .
Wouldn't it ding up my credit score if I got shot down during the application/underwriting phase trying to get a mortgage?
A mortgage broker would be able to tell me right off the bat " if you put 30% down and made X dollars over the last two years then go to Y bank and you will qualify for a certain amount" correct?
Wouldn't it ding up my credit score if I got shot down during the application/underwriting phase trying to get a mortgage?
A mortgage broker would be able to tell me right off the bat " if you put 30% down and made X dollars over the last two years then go to Y bank and you will qualify for a certain amount" correct?
For the person who asked. My yearly income was 2x the loan I was requesting and my assets were 5x. This is like asking for a 100k loan when you have 500k in cash and yearly income of 200k.
Yes, I could have solved this by paying myself with a w-2. This would have cost me an enormous amount in extra taxes - taking everything as ordinary income. Never was really an option.
I'm not sure why everyone seems to think an entity triggers self employment taxes. An LLC or LP does not. Up until next year self employment is triggered by owning or leasing seats or memberships on an exchange. Doesn't matter if you are an entity or not.
In the end I got my loan because my neighbor owns a bank. I wanted to see how far I could get the regular way without "cheating" first because I was extremely skeptical of the horror stories that I'd heard about the process. Lets say I'm now less skeptical.
Yes, I could have solved this by paying myself with a w-2. This would have cost me an enormous amount in extra taxes - taking everything as ordinary income. Never was really an option.
I'm not sure why everyone seems to think an entity triggers self employment taxes. An LLC or LP does not. Up until next year self employment is triggered by owning or leasing seats or memberships on an exchange. Doesn't matter if you are an entity or not.
In the end I got my loan because my neighbor owns a bank. I wanted to see how far I could get the regular way without "cheating" first because I was extremely skeptical of the horror stories that I'd heard about the process. Lets say I'm now less skeptical.
Open up a business account at your bank and then make regular deposits (I'm going to assume you're a profitable trader with good credit). In addition, files your tax returns (business and personal) in a timely fashion as required. Don't take out any loans, mortgages nor change residence for a few years when you first open a business account at your bank as you begin establishing a business relationship with your bank.
Make the effort to get to know your bank representative (talk to him/her several times per year in person) and use other services your bank may offer (e.g. savings plan).
Assuming you're still profitable, you shouldn't have any big obstacles after the initial few years because you'll be treated as a self-employed business owner which is what your government tax agency sees you as such too.
By the way, if your real concern is an apartment issue...pay one full year in advance and most apartment owners will rent to you assuming you have good apartment rental history (you didn't cause problems with prior landlords).
Last of all, as a trader, try hard to not accumulate new debt as you're settling into your new self-employed lifestyle and pay your bills on time...world economies (crisis) hasn't hit bottom yet.
Treat your trading like a business...its very useful in the long term.
With those numbers i'm surprized they didn't give you the loan.
Exactly
Too many traders get into trading "as if" they want to do it as a career and then fail miserably to treat their trading like a business (professional) regardless if they are losing or profitable.
In the end, those around the trader (e.g. banks, credit unions, relatives, friends, trading pals and any application for anything that ask about the trader's employment)...they usually will see the trader as a hobbyist because that trader doesn't behave as if they are a business owner.
Also, most folks knows at least one person that works for himself/herself (e.g. contractor, consultant, small store owner, repairman, tax accountant and so on)...these are individuals that can give advice about how to get started in treating ones trading like a business. I've never understood why most traders never talk to someone like such prior to getting involved in trading for a living unless they already knew it was just a hobby.
Best business owner advice I ever got about owning a business was my spouse best friend...a yoga instructor that owns her own business.
By the way, no excuse either for those that call themselves "part-time trader" because they too should treat their trading like a business.
This may sound weird, but there are special credit card programs designed for folks just coming off a BK-- banks know you can't BK again for 7 years and that you are desperate for credit cards thus likely to repay properly. No such programs for mortgages or bank loans for the self employed. If trader has w2from real firm, then he isn't self employed and its another story. It's not being a trader it's the self employment that will kill you chances at a bank without major collateral for loan size.
Having inside connections works everytime. Look at what bill Clinton and other politicos did with low income but bank connections.
Llc is a pass thru entitity that can elect to be taxed as an individual ( single member only), a corporation or a partnership. Advantage is to provide a layer of protection against legal action for the member (s)