Self-Employed and Buying a Home? Bank Statement & DSCR Loans Explained

Kristen Ambos: Hey everyone, and welcome to the Always On Point Podcast here with Kristen Ambos. Today I am so excited to bring to you Ana Curiel from Coldwell Banker Real Estate Group. Thank you for being here with us.

Ana Curiel: Thank you for having me.

Kristen Ambos: Yes. So, she is a bilingual real estate agent, and we've been talking for the last couple of weeks about this podcast and setting it up, and what is so important for people to know. Bilingual for sure, but also within different communities. And it just so happens that the Hispanic community tends to have a lot of self-employed people.

Ana Curiel: Mhm.

Kristen Ambos: And so why we wanted to bring this out was not only for them, but also for self-employed people in general, because we have a few loan programs that a lot of your typical banks and credit unions don't provide. In all the ways we've problem-solved and gotten to speak for a while, we thought this is a spot where we really need to come together and get this information out. And not only are we going to speak on it, she will translate some of it as well so that we can reach everybody listening, because we want everyone to be able to hear and understand what these programs are. So, first of all, Ana, thank you so much for being here today.

Ana Curiel: Thank you. Thank you for having me. It's exciting because we've always talked about collaborating. I've always had that passion because there's such a need for people to hear you, and you have all these great products that you can offer the community. Wisconsin as a whole has a thriving community of self-employed people.

Kristen Ambos: Yes. Right.

Ana Curiel: And it's so interesting because I've met so many who come from different backgrounds. Some people have a doctorate degree, some people are school dropouts, and they're all successful. They're running plumbing businesses, roofing businesses, restaurants, and recently I've been talking to gas station owners.

Kristen Ambos: Gas station owners. Oh my gosh.

Ana Curiel: Gas station owners are one of the groups that have been phenomenal.

Kristen Ambos: But you just hit the nail on the head. I'll speak for my own family. My husband has an associate's degree. I have an associate's degree. My daughter decided to get into the real estate world and not go to college. I'm doing a job that I didn't need to go to college for, right? There are all these things where we're all successful in our own right, and yet we didn't need that four-year degree.

Kristen Ambos: I'm super passionate about it because I always say, given our success as a family, you don't have to have a four-year degree. Don't let your background stop you, because you can be ultra-successful. Now, some careers, like being a doctor and things like that, are so specific that you have to go to college. I get that. But so many people don't, and that's why I really like to open it up to everybody.

Ana Curiel: Yeah, exactly. Because truly, if there's a will, there's a way.

Kristen Ambos: Exactly.

Ana Curiel: And sometimes book smarts don't equal getting in, getting your hands dirty, and still being successful as an owner. And not everybody is a bookkeeper.

Kristen Ambos: Exactly. When they're an owner and they're just learning it, they're leaning on their CPAs and things like that, right? I've always said a great CPA is a mortgage person's nightmare because their job is to write everything off, right? It's to take advantage of those tax deductions. And then what happens is sometimes you're left with very minimal income showing on your taxes.

Ana Curiel: Mhm.

Kristen Ambos: That doesn't mean you can't buy a house. We have loan products that have come around. And so I love that you started out saying that because that's exactly what this podcast is about.

Ana Curiel: That's awesome. And thank you for that opening, too. My parents are exactly the reason why we're here. They're entrepreneurs. They've been entrepreneurs my whole life, about 33 years. They've owned everything: a restaurant, an ice cream shop, a convenience store, and now a bar. They've been everywhere.

Ana Curiel: I remember my dad saying when we were younger, "Do you girls really think my dream growing up was to make tacos for a living?" And that got me thinking. You need to find a niche. A lot of people eventually figure out, "You know what? I'm good with my hands," or "I'm good at car washes," and then they open a car wash. People find opportunities that way.

Ana Curiel: My dream was to become a singer, but that wasn't necessarily going to buy me a house and let me go on trips with my family. Sometimes people discover what they're good at and turn that into an opportunity.

Kristen Ambos: Entrepreneurship is crazy because of where the twists and turns take you, and that's what makes entrepreneurs so successful. They're the visionary, right? And sometimes they have to be the visionary, the integrator, the bookkeeper, all the things, when really they just want to be the visionary.

Kristen Ambos: There are so many entrepreneurs who start with one thing. Let's say a plumber. They start out as a plumber, work their way up to a really successful business, and now they have cash and want to invest it. They start asking, "Okay, what do I invest in? All I really know is how to do things mechanically." Real estate can become intriguing because now they're thinking about how to diversify.

Kristen Ambos: You just said it with your parents. They started in one area and then diversified into multiple businesses. That's often how it goes for entrepreneurs. They start, then diversify because they're thinking, "What if this business goes away? What else do I have to fall back on? How do I create passive income so that when I can't use my hands and do plumbing anymore, I have something else helping create wealth for my family?" That's where real estate becomes so intriguing to so many entrepreneurs, no matter what their business background is.

Ana Curiel: And that makes me think about something else. You start as a plumber, and then you're like, "You know what? I have some cash and I want to invest it." A lot of entrepreneurs love tangible assets. They don't necessarily want to see all of their money in stocks. They're more traditional in that way. They'd rather see their money in buildings. They may say, "I have some cash. Let me buy some rental properties."

Kristen Ambos: Yeah.

Ana Curiel: And then they start growing their portfolio that way.

Kristen Ambos: Yeah.

Ana Curiel: And that's what I see happening. Somebody says, "Let me open an LLC and become a property manager. Let me offer my services not just to myself, but to a couple of other people." Then they think, "I'm good at gutters and roofing." All of a sudden, they're three businesses in.

Kristen Ambos: Yes. And one part of financing those properties is finding the person who can help you finance them. You start out with this cash, and clients come to us and say, "Okay, I have this cash, but I can't show enough income on my tax returns. I really want to be a homeowner," whether that's a primary residence or a rental property.

Kristen Ambos: That's where Ana and I have been talking about where these borrowers fit. Two of the loan programs that can be useful are the bank statement loan and the DSCR loan.

Kristen Ambos: With a DSCR loan, one important piece is that tax returns may not be required in the same way as a conventional loan. Depending on the program, borrowers may also be able to close in an LLC. DSCR programs can have different documentation requirements for assets and deposits than conventional financing.

Kristen Ambos: We can also utilize qualifying rental income instead of relying on personal tax-return income. That can help people who have been good at saving money or have capital in different places but don't necessarily fit a conventional financing box.

Kristen Ambos: I've got a client right now doing a conventional loan, and we just had the conversation yesterday where he said, "Do you need a blood sample, too?" because he's moving a lot of money around. Whenever you move money around with Fannie Mae and Freddie Mac, they want documentation. They want everything documented.

Kristen Ambos: DSCR and bank statement loans can sometimes provide more flexibility in documentation, depending on the specific program guidelines.

Ana Curiel: Is it okay if I bring up an example?

Kristen Ambos: Yes.

Ana Curiel: Let's say a guy is working at a lower income, but he has money because his dad gifted him money years ago. He has this money, but his income is so low that he can't buy a house. Are you thinking DSCR for him if he wants to become an investment-property owner?

Kristen Ambos: Yes. And I'm glad you pointed that out because DSCR is for investment properties only, not a primary residence. You can't live in the property.

Ana Curiel: Correct. Okay. That's good to know.

Kristen Ambos: But with a bank statement loan, if he's got a business on the side that brings in income, then we can look at those bank statements to determine qualifying income. Maybe he's got a lower W-2 income, but he also has a side business. That could potentially open up another option.

Ana Curiel: Okay. And that can be a primary residence?

Kristen Ambos: Yes, depending on the program.

Ana Curiel: So let's say this same guy started the business today. When can he come in and say, "I have enough history with this business"? When can he qualify?

Kristen Ambos: Twelve months. We need 12 months of bank statements at a minimum for certain programs. Twenty-four months can help. There's a little bit of flexibility in the bank statement loan world where you may be able to use 12 months instead of the two years you typically see with conventional financing. If you have two years, that can show more stability and may affect pricing or available options.

Ana Curiel: Okay. And for these individuals, what do you look at? Like you pointed out before, there are all these deductions. Let's say the business brings in $10,000 a month, but with deductions, vehicles, staff and everything else, there are $8,000 in expenses. Do you look at both sides?

Kristen Ambos: Yes. We look at the deposits. With a bank statement loan, if they're consistently bringing in $10,000 in qualifying deposits, we have an income calculator and a program methodology we use to determine qualifying income.

Kristen Ambos: I love that you're asking about this because I've got a client right now who is buying a house with a DSCR loan, but she's also refinancing a property that's free and clear to pull cash out. She can't show enough income on her tax returns for the cash-out refinance, so we're using two different loans for the same self-employed client.

Kristen Ambos: One property is being purchased using DSCR for investment purposes, and the other is being refinanced with a bank statement loan because we need to document income differently for that property. In this particular case, she has a credit score in the 620s and we're still able to put a strategy together.

Ana Curiel: That's awesome.

Kristen Ambos: With a stronger credit profile, you may get a little more flexibility and potentially have different down-payment options. In her case, she's putting 35% down, but she's still getting it done. We can use different programs for different properties depending on the purpose of each loan.

Ana Curiel: That's pretty cool. That's pretty impressive.

Kristen Ambos: Yes. You have to get creative with these scenarios.

Ana Curiel: And that's why it's so important for buyers to know there isn't just one type of borrower. Most people aren't the perfect traditional buyer every bank wants. Local banks may say, "I want two years of this, two years of that, and this credit score," and people start feeling like the door is closed.

Ana Curiel: I've had self-employed customers get told, "You qualify for X amount," and then we go out shopping. They look at the houses and say, "Ana, I can afford a $3,000 payment." Later in the conversation, I find out, "Well, I also have my cleaning business." And I'm like, "Hold on a minute. We need to look at this differently."

Kristen Ambos: Yes.

Ana Curiel: You're shopping based on the wrong financing picture. We need to talk to somebody like Kristen who has access to different programs that may better fit the circumstances.

Kristen Ambos: And what you just brought up is such a key point. Don't be afraid to tell us about your complete financial picture.

Ana Curiel: Sorry to interrupt, but especially with my buyers, sometimes they don't want to tell us about all of their accounts.

Kristen Ambos: Yes.

Ana Curiel: And I'm like, we're not taking all your money. She just wants to understand what she can work with. We need to know the whole picture.

Kristen Ambos: Exactly. The more I know about your legitimate income, businesses, assets and financial situation, the more accurately I can evaluate your mortgage options. If you tell me you have another business or another income source, that can sometimes open up an entirely different conversation.

Kristen Ambos: Or talk to Ana. Let her understand the situation, and then she can call me and say, "What about this?" or "What about that?" and I can help answer those questions. I love the problem-solving side of this business because no two situations are exactly the same.

Ana Curiel: There's not. There's not.

Kristen Ambos: With the client I'm working with right now, I never would have thought we'd be doing what we're doing. In 25 years of doing this, it's the first time I'm working with one client at the same time on two totally different non-QM loans.

Kristen Ambos: These are not your traditional mortgages. They may carry somewhat higher interest rates because they're doing something non-traditional and taking on different risk. But the end result can be significant for a borrower who otherwise may not fit conventional guidelines.

Kristen Ambos: I always say it's almost like the best of both worlds. It's not exactly a commercial loan, and it's not exactly a traditional residential mortgage. Depending on the program, you may be able to use an LLC and still have a 30-year fixed structure.

Ana Curiel: Now that you brought up LLCs, can these loans be under an LLC, or do they have to be under an individual's name?

Kristen Ambos: Depending on the program and property type, they may be structured either way.

Ana Curiel: Okay, that's cool.

Kristen Ambos: Some people are very passionate about wanting the property under their personal name, while others have CPAs who recommend an LLC. That's something you and your CPA should determine.

Kristen Ambos: I can tell you about my own experiences as an investor, buying primary residences, buying investment properties, having an LLC and deciding when to use it. But I'm not going to tell you what you should do for your personal tax or legal situation. That's where you should lean on your CPA and other appropriate professionals.

Ana Curiel: Yeah. Awesome. Then let's find a financing option that fits. I'm very passionate about helping self-employed people.

Kristen Ambos: Yes.

Ana Curiel: Because my parents were and are self-employed, and I see the struggle. I see people who are able to pay a mortgage, but they have trouble getting into one because a traditional bank may not lend them the money. They have dreams, and when you come in and help make that dream happen, it's pretty cool.

Kristen Ambos: It starts that way, and then it can snowball from there. Eventually you're saying, "Okay, how do I buy more properties if I don't have 20% down for every one of them?" That's when we start talking about leveraging existing real estate.

Kristen Ambos: With my client, we're pulling equity out of a property that was free and clear. That property is already producing rental income. We're taking cash from that property and using it toward the purchase of another property that is also expected to cash flow.

Ana Curiel: So is this like an equity loan for the down payment?

Kristen Ambos: Not exactly. Let me clarify because it can get confusing. We're using the bank statement loan to refinance the existing property and pull cash out. Then we're using a DSCR loan to purchase the next investment property because qualifying rental income can be part of that loan's analysis.

Kristen Ambos: So we're using equity from a property they already own. We're refinancing that property, pulling cash out, and then using those proceeds toward the next house. Instead of using cash they were holding in their bank account, they're leveraging equity from an existing asset.

Ana Curiel: Hey, I like keeping cash, too.

Kristen Ambos: Same. I understand when people say, "I have that cash, but I'd rather keep it." Depending on the loan structure, using equity from existing properties may be part of the strategy for purchasing additional real estate.

Ana Curiel: Some of my buyers always ask about the interest rate. They're very passionate about that. They want to know how a DSCR or bank statement loan compares with a conventional loan. How much higher can the rate be?

Kristen Ambos: That's a great question. Generally, they can be somewhat higher. Credit score is a big driver. If your credit is lower, the rate may be higher. But in some cases, the alternative is that the borrower may not qualify for the traditional loan at all.

Kristen Ambos: I have a client right now building a rental portfolio using DSCR financing. They're planning to hold these properties for a while, so they were comfortable considering a prepayment-penalty structure. The exact rate and terms depend on the market and program at the time.

Ana Curiel: Okay.

Kristen Ambos: If somebody doesn't want a prepayment penalty because they expect to pay the loan off quickly, they may choose a different structure with a higher interest rate. It's all part of the individual's strategy.

Ana Curiel: Mhm.

Kristen Ambos: Everybody's got a different system and a different plan.

Ana Curiel: Even when I bought my rental property, my rate was higher than some other financing I've seen. And I had a closing on a bank statement loan where the borrower did better than I expected. It just shows that every situation is different.

Kristen Ambos: Right. That's awesome. Home equity loans and second mortgages also have their own rates and restrictions, depending on loan-to-value, credit score and the lender. That's why it can be useful to compare the complete financing structure rather than assuming one type of loan is always more expensive than another.

Ana Curiel: It is great. I would love to redo this in Spanish.

Kristen Ambos: Yes.

Ana Curiel: Because we went through a couple of examples that I think are a must. I would love to redo the bank statement loan information in Spanish.

Kristen Ambos: Yes.

Ana Curiel: This is so important for people to understand. We have such a thriving self-employed community here in Green Bay. So, with the 12-month bank statement loan, you're the person to call. You understand that running a business comes with deductions, but you're also looking at qualifying deposits.

Kristen Ambos: Absolutely. And even though I speak English, Point Mortgage Corporation has loan officers licensed in Wisconsin who are fluent in Spanish and bilingual. We can make sure borrowers have somebody they're comfortable working with, and Spanish-language application options are also available.

Ana Curiel: And the application, yes. Gracias.

Kristen Ambos: There's such an amazing community here locally, like you said, and there are so many self-employed people. I'm a self-employed person at heart. My husband and I have a couple of businesses. We truly understand that piece of it.

Kristen Ambos: That's what's so important. It's not just knowing guidelines. It's understanding the background of what business owners are dealing with and being able to problem-solve within the applicable lending guidelines.

Ana Curiel: I'm actually getting my roof done right now because we had hail at the end of June. Luckily, I'm able to work through an insurance claim. But I'm a talker. I'm an entertainer. I love people. I've been doing real estate for the last three years, and it's been fun. Kristen, that's it. Three years.

Kristen Ambos: It's been three years? Ana, I feel like it's been 10.

Ana Curiel: I know. It feels like I've done so much.

Kristen Ambos: I would have thought you'd been in real estate much longer.

Ana Curiel: I live in Green Bay, and I've lived in Green Bay forever. I know a lot of people. I was an engineer for about 10 years, a production improvement engineer, so I met a lot of people there. I'm very involved in my church. My parents are everywhere. I know a lot of people in the community.

Kristen Ambos: You're very involved in the community. I love it. Good for you.

Ana Curiel: This was our second year doing Bible camp. I called Marcy and told her what I was doing, and she said, "How do you have time for this?" And I'm like, "I don't. I just make it work."

Kristen Ambos: Yes. You just make it work. That's exactly it. We all have the same 24 hours. Sometimes we don't have the time, but we make it work. You have one life, and you've got to make it work.

Ana Curiel: Yes. And it's so rewarding when I get to give the keys to buyers. I'm tearing up with them, especially when we get their dream house.

Kristen Ambos: Girl, 25 years later, and I've never stopped getting excited about an accepted offer or a clear to close.

Ana Curiel: Oh my gosh. It's the best feeling in the world.

Kristen Ambos: Yeah.

Ana Curiel: I love that. It's such a happy moment. That's why I love people and love talking to people. When I first started in real estate, I wanted my name out there, so I would go to restaurants and hand my business cards to the waiters and say, "Hey guys, I'm a real estate agent now."

Kristen Ambos: You never know who they know.

Ana Curiel: Exactly. I love talking to people. I feel very passionate about helping everybody: the first-time homebuyer, the person buying real estate for business purposes, and investors. I get to meet so many different people.

Kristen Ambos: That's awesome. Keep doing what you're doing because I would have thought you'd been in real estate a lot longer than three years.

Ana Curiel: It does feel like I've been doing it longer. I think my education helped make me stronger, too, because I have that engineering and production background. I can relate to a lot of different people.

Kristen Ambos: Absolutely.

Ana Curiel: If somebody says they're a production worker, I understand it. I know what it's like waking up at five in the morning and punching in and punching out. I've been there.

Kristen Ambos: I've been with you. I used to work at the pickle plant here. I spent summers doing that between college. The more varied experiences you have and the more different jobs you do when you're younger, the more you realize and value what goes into all these different types of work.

Kristen Ambos: I've done manufacturing, office work, and I even audited dumpsters from a garbage truck one summer. I was all over the place. You meet a ton of people, and it really grounds you in understanding what goes into different jobs and different people's lives.

Ana Curiel: Yeah. Especially when you're the new person and people think, "Oh, she doesn't know anything." As a woman, I've dealt with that, too. Then I start talking about mechanics or the things I know, and it surprises people.

Ana Curiel: So yes, I only have three years practicing real estate, but my parents have been involved in real estate forever.

Ana Curiel: Even when I first decided to become an engineer, my parents were saying, "Hey, one of you should go into real estate." We were like, "No, we don't want to do real estate." My parents were always buying and selling properties, and at the time I wasn't interested.

Ana Curiel: Then there was a point where I made a career switch and became a stay-at-home mom. Now I have three kids, and they keep me busy.

Kristen Ambos: They keep you busy. That plus real estate means your hands are full, but you manage it well and juggle it all very well.

Ana Curiel: At the office, my brokers love telling this story. I was in labor with my third baby and putting in a $2.5 million offer.

Kristen Ambos: Oh my gosh.

Ana Curiel: I was in the hospital. I had the baby, and then I got the text saying, "Hey, your offer was accepted." So when people say real estate agents work 24/7, they're not lying.

Kristen Ambos: They're not lying. And that's what you need. That's your go-to person.

Ana Curiel: I work hard for my people. I really do. I'm always saying, "Hey, look at this opportunity," or digging into the details and trying to make sure we're working with the right people.

Kristen Ambos: Yes. The details are so important.

Ana Curiel: Yes. They help people make good decisions. I always tell people, "What is meant to be will be," because the right house is going to come, and sometimes it's going to be even better than what you thought.

Kristen Ambos: Yeah.

Ana Curiel: Sometimes the first offer I put in is the accepted offer, and that's exciting. Sometimes it takes a couple of offers, and I'm sad for my buyers, but I know something bigger and better may be coming. I love the journey.

Kristen Ambos: Good for you.

Ana Curiel: Thank you.

Kristen Ambos: And thank you so much for being here today. If you're listening and you're looking for a real estate agent, reach out to Ana. She is with Coldwell Banker Real Estate Group here in Green Bay and Northeastern Wisconsin. She's a bilingual real estate agent, she's deeply involved in the community, and she works hard for her clients.

Ana Curiel: Yes, I do.

Kristen Ambos: And as always, thank you so much to our audience for listening. We appreciate you. Click like and subscribe, and share this episode with somebody who could use this information, whether they're self-employed, interested in a bank statement loan, exploring investment-property financing, or simply want to understand the next steps.

Kristen Ambos: Ana is your girl on the real estate side, and we're here to help with the mortgage side. Thank you so much for being here. We'll see you next week.