The Jon Sanchez Show

10/17-How much will mortgage companies lend you?

When it comes to buying a home, there are two ways to determine your price range. One, what you personally think you can afford. Two, what the lender thinks you can afford. This afternoon on the Jon Sanchez Show at 3pm, we’ll review in depth how mortgage companies determine what they will lend you.

Duration:: 35m
Broadcast on:: 17 Oct 2024
Audio Format:: other

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Good Thursday afternoon, Tia, welcome to the John Sanchez Show on Newstalk 780-K-O-H. It's a pleasure to be with you and a pleasure to be with both of my co-hosts this afternoon. Both of them. We got them all. Cannot wait to have tonight's topic. Don't wipe my lard. Sinner Jew and Linden. How are you, my friend? Welcome back. I'm doing fantastic. Oh, thank you, John. I'm doing fantastic. Good day. Doing awesome, man. Doing awesome. Thank you. Appreciate it. Cory edge of edge, really. Big C. How you being? I'm doing good, buddy. How are you doing? Doing excellent, my man. Doing excellent. I appreciate you asking. Definitely. Well, again, it's great to have all three of us back behind the microphones, the phones, et cetera. Let me tell you what we have lined up for you this afternoon. I'll give you the stock market recap. A little bit of a frustrating day-to-day, even though it was a record-setting day for the Dow Jones Industrial Average, a little frustrating on the NASDAQ and the S&P side of things. Of course, all the details, and then we're going to move over to our real estate topic, probably going to get a little bit of an early start on it. You know, when it comes to buying a home, there are two ways to determine your price range. Think about this the last time you bought a home. First one, what you personally think you can afford, what your personal budget will support. The second one, is this guy sitting on the other side of the microphone? And that is what the lender thinks you can afford. And many times, they are not the same figures by any stretch of the imagination. Well, this afternoon, what we're going to do is we're going to go in-depth with Dwight and Corey and determine how mortgage companies figure out what amount of money they are going to lend to you. Right? Again, it may be higher than what your personal budget says that you can afford. It may be lower, but so many different variables come into play. And Dwight, you know, everybody thinks that there's this big magical secret that is out there, and you lenders, you know, you just kind of pick a number out of a hat and say, "Oh, you know what, Corey can afford an $800,000 house, but John can only afford a $600,000 house." You know, what's behind it all? And that's what you're going to enlighten us on this afternoon. Well, and I don't think people want to hear this, but at the end of the day, John, it comes back to automated and artificial intelligence, right? We run it through an automated program, and, you know, we kind of follow the results that Danny Freddie, FHA, they're also arrogantly and, you know, lots of pride in the systems that they think, you know, "Hey, if our system approves it, then you're good if it doesn't, and then we are standby our results." And good luck. So, I mean, so those are -- there's different ways around it, but at the end of the day, it's the proper data in the system yields the proper results, right? So we can cover -- Yeah, for sure, and so -- but there are other ways and opportunities, but, yeah, at the end of the day, that's what we're hoping for when we put a scenario through the system. We're hoping that the first thing we get, which is the biggest hurdle, is an approved eligible on the file. With that, then, it's all about documentation, verifying what we put in, and off we go. But that's the biggest thing. Cory, he makes it sound so easy. And we're on the other side of it. It's not that easy, Dwight. Come on, now. It's not that easy. That's why you're so good at what you do. Piece of cake. Cory, are you ever surprised when a client comes to you and says, "Cory, I want to buy, you know, whatever, $800,000 house, you know, I've got a good credit score, I've been on the job a long time, I've got the down payment, and, you know, you start searching for it, and then a lender comes back and says, "This person's only qualified for $700,000," or maybe $900,000. Do you get those surprises, or I'm going to guess that you're going to say the answer is no, because you're not going to talk to anybody unless they've got a pre-qual letter, which is going to answer that question anyways, correct? Most of them, by the time I get to me, they've been pre-qualled, or that's the first place I send them. But as you and I talked about this super briefly off air this morning, the biggest ones I see that happen to are self-employed. Anytime that, and, Dwight, please correct me if I'm wrong, but anytime you have someone that has a write-off, that's different businesses, that's different things, and it's trying to show the taxable income as low as possible, but then goes to the lender and says, "No, no, I can afford $10,000 a month like while you're reporting income of $2,000 a month, so something doesn't really work here," and those are the ones that I always see. I would assume, and again, Dwight can tell us for sure, I would assume, straight W-2, straight, kind of, you know, bread and butter stuff, you can kind of figure that stuff out on your own book. You can get a write-off, all different things that boils down to what you're telling Uncle Sam. Yeah, absolutely. And John, you know, Trump so eloquently put it at one of his debates, "Hey, I only was calling with the government and allowed me to do," right, and so that's exactly what everybody does, and it's not illegal, it's not wrong, it's their ability. I mean, John, you have a lot of high-network individuals that we've worked on the same thing, you know? So it is a tough one. I don't want to pay Uncle Sam, but I want to qualify for a $750 moreish, those don't. Those are opposing goals there, you know, and so it's very tough, and Cory's spot on. There are a lot of challenges within this self-employment arena, especially starting with the two years of being self-employed, right? A lot of people have a tough one at that, so yeah, but it is true because they're just following what the guidelines allow them to do, and then when you go and say, "Hey, here's the problem," wait a minute, because Cory's right, usually a self-employment will put what their gross is, not what their adjusted gross is. I make $45,000 a month, well, on your gross, you did, but at the end of the day, your adjusted gross was $1,000, and I mean, I know John, I've seen that, you know? Oh yeah, that was Cory and I have a very dear friend, he has talked about that as multiple companies hit with the same thing, you know, you're just trying to do what's best for you and your family in terms of paying less taxes and keeping more in your pocket, but when it comes to trying to finance something, just makes it tougher. Well, Dwight, I don't know how much experience you've had over the years working with, I'll call it, investors, tech founders down in Silicon Valley, and obviously we have some here locally, but you get these guys that don't make a lot of money starting up companies or maybe they come in as a big investor, they're not making a lot of money now, but on paper they may have a massive net worth, multi-million dollar net worth, but they're not taking a lot of money out of the company at this point, and on paper, if you look at the pure income, they're like, "Wait a minute, you're only making $40,000 a year, but yet you're showing your worth $10 million because of the value of the stock that you own and the sub-start company." I mean, there's a million different variations, and so I want to, Corey, I want to thank you for bringing that to my attention this morning, as you said, we were chatting off air, and Dwight, I think I want you to spend a lot of time moving in in this direction of the self-employed. We'll talk about everybody else, but I think to Corey's point, we need to spend a lot of time for the self-employed because, again, you're right, there's a lot of deductions that businesses can take, but yet it doesn't, it transfers to the bottom line in a negative fashion from an income standpoint, and, again, many self-employed people get very, very frustrated with that whole scenario, so yeah, let's spend a lot of time on that one, guys. Definitely. You just had a scenario where he's been working for the company for five years, not you two, and 90 days ago, his accountant and attorney told him to flip them all to 1099s, and now you're self-employed, now you're 1099. I can't help you. You know, you've got to have two years of the 1099, so you're starting to see some of that movement in the employment factor, the employers, and that's another one, you know, and so he's coming to me going, "Hey, I've made all this money, I can share all my W-2s. I haven't lost any accounts. It's the same one. It was a cleaning service. Same all my clients." Well, now you're 1099. Nothing's taken out of your paycheck, therefore, yeah, it's, yeah, go. Okay. All right. Well, a lot that we can chat about. It's going to be a fascinating topic about, again, how much will mortgage companies lend you? All right, let's get down to the stock market side of things, guys. So, you know, we come into today, modest gains for the Dow and the S&P in the pre-market session, stellar gains on the NASDAQ. NASDAQ was up 182 points, my first update at 523. By the time the opening bell rang, we were up over 200 points, about 230 to be exact. It looked, again, all of the ingredients were there for this market to have one heck of a rally. Record-setting day yesterday, we had a nice comeback, wiped out the previous day's losses. The NASDAQ came back modestly yesterday. I think we had a 50-point gain, if I remember yesterday, put a dent in the previous day's losses. So, the NASDAQ was very much well-positioned for some great gains today. The catalyst of the NASDAQ today was Taiwan semiconductor. They reported just blowout earnings numbers. The stock was very strong in the pre-market session. Finished the day up very nicely. Also, $18.36 increase for TSM, 9.8% gain to $205.84. That drilled in a video higher, which finished up about $1.74 some around there. Again, brought a lot of positive bias to the market. But man, this market just would not hold. As far as the Dow side of things, it was like the Locomoe game. Every time they tried to bid it up, they came in and they bid it down. And it was just, as a matter of fact, it was so bad that I made a joke this morning with Ryan when I was doing the stock updates. The charts of the Dow sitting in front of me look like an EKG monitor, a paramedic monitoring your heartbeat. It was just up, down, up, down, up, down, but in a very, very narrow trading range. And that's kind of how we finished up. There was some economic news, Dwight, that rocked your world, it was better than expected. That drove interest rates higher, which I know you're not happy about. I'm not happy about it because it had a negative impact on the stock market. So when we come back from this break, I'll tell you what happened and why these bond yields shot up and then the overall reaction in the stock market side of things, then we'll get to our topic. Turn over to Kristen Snow. She's in the right now, traffic's in, all right, Kristen? Welcome back to the John Sanchez Show on Newstalk 780K, which with the Dwight Milliner of Sanhajuwen lending to Korea, of course, of edge-rility. All right, before we get to the markets, and then our real estate topic, quick reminder, my friends over at S&W Tracker have an incredible inventory hidden into the winter time. That's right. Big tractors, small ones, everything in between. I'm talking about the incredible Coyote Chocter. You're going to be amazed at the affordability of them, the longevity of them, the reliability of them. And then you've got an excellent dealer that backs them up day in and day out, literally day in and day out. Seven days a week. I've used them. Trust me. They do enter the phone. The crew at 4880 East Nye Lane, they'll put together a great, great package for you. All the implements, everything that you need, 0% financing for 84 months, they got it all. Once again, 4880 East Nye Lane in Carson City, online at snwtractor.com, and the phone number is 882-1225, 882-1225. All right, again as I was a, what Dwight, what kind of day was it on the Dow Jones Industrial Average today? Another record-setting day. Amazing. A hundred and sixty one point gain, like I said, our best level, we were up just slightly above the two hundred plus point mark and worst level, we were, I don't even remember where we were. It was such a wild ride today. I'm not going to guess. Point three, seven percent gain on the Dow, 43-239 close. After being up, like I said, over two hundred points in the pre-market session on the NASDAQ, we finished with a whopping gain of seven points and a whopping loss of two points on the S&P 500. Oil prices, not much movement, four tenths of a percent gain, 70-62, a barrel. Good day for gold though, $16.20 an ounce, 2007-07-50. And here we go, Dwight, eight basis point increase, dog on you, your bond market hurt my stock market. Eight basis point increase on the tenured treasury, yield of four tenth, before Dwight gives us the interpretation in relation to the mortgage rates, I'll tell you why this happened. Real simple, we had retail sales check in this morning, up four tenths of a percent. That was a bit better than the three tenths of a percent increase, shows you the consumer are doing very well. And then all the talk came back to, is the Fed going to give us a quarter percent cut? Are they not? It was one of those days, folks, where that happened. And then industrial production, capacity utilization, both of those numbers were down a little bit, same with the initial claims down 19,000 filings. So it wasn't the best economic data, but, you know, Dwight, I think you would agree with me. The reaction in the bond market today, I think, was way, way overdone based upon the economic data. What basis point increase on the tenured, nine basis point increase on the 30-year bond, five on the three-year and four basis point increase on the two-year. I'm afraid to ask how we did on the 30-year mortgage. Well, I'm going to be the e-or of the night, right? John, to your point, I mean, I hope you're right, because it really felt, I mean, and the numbers weren't amiss by a ton, but they were just worse than what they expected or better, however you want to look at it. But the mortgage-backed security market took a beating over and above what the attorney market showed. So we lost five basis points currently right now, the 30-year fixed mortgage average, according to mortgage use daily, is 6.68. And John, I want to reiterate, as I do often, this is for the triple-A borrower with great money down, all the goods, so anybody that's flirting with a 6.75, 6.80 credit score, even though they get approved, I mean, it's challenging, I mean, to keep them out of the 7 percent range now. And we're back into that, and it is a really, really tough thing to sell, especially when everybody still remembers, hey, didn't the feds lower the rates at half a point? You know, rates got to be great. The media's not even covering this, John, they're not even covering what mortgage rates are inching back up. And it just, you know, everything to me, again, it feels like it's political. Why are we not covering this? And you know, nobody's covering it, but in the moment, you get a good day in the in the ball market. Rates are down and then, but it rates down from what, seven and a quarter, you know, or whatever it is. Yeah. Yeah. So, yeah. Yeah. So anyhow, I hope you're right. I hope this was just, you know, just too much one way from the bond market and we see a little bit. But, John, I got to put that, probably puts the fed future now, what, 50/50 maybe? 90 percent of a quarter, 90 percent of a quarter as of this morning. Yeah. Somebody and everything, they're backing off of this one. So anyhow, it's hard to tell. You got a little bit longer to decide, but yeah, it's, it's done nothing. I, I tell people, go back to my Tuesday comment when we do the show before the fed rate, lowered the rates a half. Remember, I said to you, why are they going to even mess with it? John, we were at five in a quarter. Yeah. Yeah. On a 30 year fixed. Ready? That one, what in the world? And I said, they're just going to screw it up and screw it up and, and it's just amazing because they're even, now it is the consumer, you know, out of touch with it as they would be, right? Because they're managing their own lives. But a lot of these realtors and these builder agents, they, they don't have a clue either, what, what the movement has done. And I tell them that the reason why I'm so smart and I said that, Tonya, because that I have to do this show, I, therefore I have to be up to date because you're not going to let me slide. Nope. And so therefore I watch it and I pay attention, but this, I mean, we've lost almost a full point. Yes. Exactly. Well, you know, Corey and I, remember Corey on Tuesday when we, when we were doing the show together and I touched on that, that Wall Street Journal article, do I don't know if you saw that again, it came out on Tuesday and it was an article talking about how the national builders, again, we've touched on this subject many times, thanks to you and Corey. The article is about how these national builders are subsidizing, you know, the mortgage rates, right? And, and many of them, you know, offering like there was one in Texas offering 5% for the first year. And then what was it, Corey? Five and a half or something like maybe, no, maybe it was four of the first year and five or five and a half, you know, they're out there, you know, like for the next nine years or something. I mean, it was like, holy moly, how, you know, how does anybody compete against something like that? But Corey brought up a great point. You know, we've had a couple earnings warnings from some of the major builders because they're spending a lot of money on this rate by downside, right? Because exactly as you said, these rates have moved up and people are starting to get a little bit panicked. And it's all competitive and people are willing to walk and not buy today. And so that's where the throw is saying, Hey, wait a minute, I got to burn the hand right here. What is it going to take for me to do it? But John, that's the reason why forward commitments where a builder goes out and buys a block of money to protect their, you know, you usually do that when rates are going up or doing it when it goes down. Because if by a block of money, John, you, that does not count in addition to the concession, remember, we've talked about concessions, so they can buy a block of money and still give the consumer a bigger concession. So it's just a bigger paycheck. The builder has to write just to come in that way. Stop covers that you love. You lost me on that one. Okay. So typically a builder can offer concessions, so let's just use 6% as a concession. Let's just say to put enough money on 6%. So if I come in, I get 6%. That's all I get. And the goal is to buy down rate and helping with closing costs, right? So what they do is they go out and buy a block of money. Let's just say at 6%. They put you in that block and they can still give you the 6%. So they bought your rate down in the concession and in the forward, right? They paid a lot and they buy it down in the forward and can still give you the 6%. So it's almost a double whammy for the builders right now. That's why you're seeing those earnings because they're going deeper than what normal concessions would. Maybe I'm tired but it's still not clicking. Corey Chime in here if you can interpret this because I'm still stuck. Okay. They go out and they buy a block of money for 6%. They offer me the buyer 6%. That makes perfect sense. But I'm losing you on the other concession. They still have the same concession. None of that, buying down the rate inside of the forward does not count towards the concession to the borrower. So what do you decide to pay all that borrower? 6%. Think of it this way, Jonathan. If you're the buyer and I'm the seller and you say, "I want you to pay all my closing costs and the rate buy down all this stuff," the max I can give you is 6% of the sales price. That's the most that the lender will allow me to sell the dollar to. Okay. Okay. Okay. They've still got to do that but they've already bought down your rate to 6%. So you're getting a huge reduction. And as you and I talked about, that's all going to be hidden in the balance sheet of the big companies. Yes. That's when they talk about the reporting or whatever. They come out with their financials and then they have the earnings call and all that. That's why people got to listen and say, "Okay. I know you sold the house for 800, but you netted 80 grand less than what that should have quite too soared. That money go, "Oh, I want to the buyer concessions." Right. Gotcha. All right. Sorry, guys. It wasn't making sense. Well, I got it. And I tried to explain it, right? But it just, it's exceeding. I'm tired. It's creating ways. Yeah. They're just finding ways, John, to give you even more than what, you know, I mean, this is all legal, but it's just, so that's what they're doing. They're just pointing at these games and it's just costing them a lot of money. Absolutely. Absolutely. All right. Great explanation. Thank you. All right. And we come back. How much will a mortgage company lend to you? What's it based on? Not your personal budget. That's what it's going to explain what they are. When we come back, let's start over to Greg Neff in the meantime, he's got news traffic and weather. Mr. Neff, it's all yours. Welcome back to the John Sanchez Show on Newstalk 780KOH, it's with the core age of its reliability, Dwight Millard of Cenagie 1-Lindeem. Once again, we finished up 161 on the Dow to a closing record of 43-239, and as I gained 7, S&P, lower by 1. All right. We're going to delve into our topic this evening. How much will mortgage companies lend you? There's a lot to it. Do I give us a little tease at the beginning of the show, the automated underwriting system? We're going to touch on that, so on and so forth, but then we're going to spend quite a bit of time for those of you that are entrepreneurs because, again, you've got a little bit of additional challenges. It's not quite so easy as Dwight said. You don't have a W-2. You've got 1099s. You have deductions. You have depreciation. You have all of these different things that only an experienced lender like Mr. Millard can sort through to really get to the bottom line. All right, Dwight, let's start our discussion off with. You've mentioned it many times. We've done some shows on it, but it's been years. The magical automated underwriting system. What is this machine? Yeah, so it was created. It was designed by Fannie and Freddie, FHA and VA have their own versions of it, but it's an algorithm that they tighten down, they loosen up, as they see fit, and there's constant maintenance on the system. But what you're basically doing, John, is you're taking the information that the consumer has either given to you or they've done through an online application, or however they've done it, that information is put through the automated underwriting system, and it will generate an approval or a referred, doesn't say, decline based upon that amount that you're seeking in a loan amount, off of a sales price, and what they've put in there and/or what you've been able to verify for income assets, and obviously you have to have a credit ran because you have to merge the credit into the system so it can look at the credit as well. So, John, those are your big three things it's looking at. It's looking at your two-year earning history from your employment, your credit score, and your asset documentation. How does it all my earnings history? How does it all my earnings history? Well, the reason why I say earnings history is we used to say you have to have two years, and people always think it's on the same job. So, as long as you are showing that you have an earning history, even if you switch to a couple of jobs, that's not going to hurt your ability to qualify as long as your income is still pretty consistent. So, if you're working at a retail store and you go to another one for a little bit more, or you can go to another customer service thing, that's all okay. I mean, in the old days, they want to see you on the same job, so not so much today. But again, you can't have a big gap and you can't have unstable income, but it's not going to penalize you to move around like you should. And again, to clarify, because this was brought up a few weeks ago, we were mentioning something similar to this, you clarify that it doesn't have to be in the same industry like it used to. If you're a manager of Walmart and you want to go to Target, no problem, but if you're a manager of Walmart and now you want to go be somebody in the construction site, that's completely different. Or do you care? No. As long as I can verify the income, and yeah, as long as you're not going into a commission type of field or something like that, but absolutely, they're not penalizing now. Yeah. They're not penalizing for that. Yeah. Which is a great step in the right direction, John, especially with today's scenario. Okay. So we've got, we've got, excuse me, we've got automated underwriting, either says, yeah, or nay. Obviously, this is where you come in. When it says nay, now take us to the next level. What are you going to do? No. So, yes, yeah, if you get a refer, you've got to dig into the reasons why it's going to be referred. You know, it doesn't like your credit score. It doesn't like something, you know, inside of that, and you can work on that and you can adjust it. So, a lot of times, if you have a low credit score, you know, let's just say you have a, you know, a 605, I'm going to use that, and you're trying to get a 95% conventional loan. It probably is not going to do those two, you know, so, but if you said, oh, so let me put 10% down on that 605, you can start to play with the system to see what it would take and what scenario it would do. But, yeah, so you're just going to have to deal with what it, you know, it'll give you the reasons why it's valuing the risk factor on the loan and what you, you know, and that's what you have to get addressed. Okay, but let's get down to our topic this evening, which is, does the system say, John Sanchez is, okay, let's say I got an approval. Let's say what I'm approved for, or, you know, if I come in and say, I want to buy an $800,000 horse with a system, say, approved for $800, or only approved for $600, or a million. Does that? Well, it will only give us an approval based on the specifics we put in. But, John, if I put you in at $600,000 loan and your debt to income ratio, which I can go away to a 49 on conventional and your debt to income ratio is 38, I got a lot of wiggle on there, right? I mean, I can. The $600 probably now can go up and I can take you, I can take it up individually, you know, $750, $800 and see if it, you know, on approval. So you have to specifically remark that load them out and it'll give you that. So typically what we do is we'll go hire somebody's shopping, like, of course, clients will go up probably another $50,000, $60,000 from what they're looking at and get that approval that way. I am arrested. Okay. I have two questions. The first one is I'm guessing after almost 100 years in the business, you have a pretty good idea before you enter all the stuff into the computer, what it's going to do. And then the other question I have is if I remember correctly in the old days and maybe it's different now, I thought you used to tell me, like, hey, we have an approval and if we wanted to go get another approval, we're going to lose the one we have. So we have to be careful to not end up with nothing. Is it different now? Well, so what happens is, yeah, Cory, I typically can tell who's qualifyable or not even based upon credit scores and incomes, that's the income ratios. I'm hopefully educating even underwriters these days, but to a second point, the system does know how many times you run it through it, you know, it will keep a tally and it starts to get it. So when you run a loan through a system and you change any variable from what that automated, so it can be assets, it can be income, it can be anything, it has the ability to reconfigure and produce a different result. And John, you are seeing that and Cory, I know we're seeing that today where somebody right now is qualified on this and everything's good and all of a sudden, you know, they're getting a gift now for five grand, would we have and it could throw it from an approved to refer and this isn't the end, John. So so these because it was a gift, something positive, I'm using that as a scenario because I've seen that, but it could be any so even we have to even run it through the automated underwriting system, John, even at final approval. So a loan is ran through the automated underwriting system, probably two or three times minimum to the process because it all has to match up. So the approval I get, so let's just see, I'm working on a new construction. I get an approval today and it looks great and you know, I got I got to kind of maintain it, but I get down closer to the house to be done and let's just say they went late on the credit card that could change the approval that you got six, five months ago, four months ago. So you have to be very, very careful, especially with new construction, because what you get as an approval, you've really got to work hard to maintain that through that course of that construction. Okay. And then don't you run it also literally the day of closing before you fund? At the underwriter, the underwriter, right, at the moment of approval where they make every make sure everything matches from the application. So basically, like the, like the day of or day of funding. Yeah. Yeah. A few days before. Yeah. Yeah. That's why you've always said, don't go out and charge stuff. Once you do. Don't go out. Well, we know. Pre-buy your furniture and everything. Yeah. Yeah. Well, yeah. Well, John, everybody's required to do credit refreshes too. So don't think we won't know. We have to do credit refresh 10 days before closing and that's basically looking for any other activity that has occurred since the loan application. Big brother is watching. Big brother is watching. Oh, yeah. All the time. More than ever. Yeah. No kidding. All right. When we come back, let's help Corey and I out on the self-employed side of things. Let's find out what your secrets are there and how you determine how much you'll lend somebody if they are an entrepreneur. In the meantime, let's wrap it up with a wonderful Kristin Snow. She's in the right now. Traffic center. Hi, Kristin. Welcome back to the John Sanchez Show at Delve White Millard Synergy Lending. Phone number, sir. 240-2022. Corey Edge. Adrilety. Thank you, Dwight. Phone number, sir. 673-6700. Thank you. Boys. Do appreciate it. All right, Dwight. We're an entrepreneur. Corey and I are entrepreneurs. How do you tell us what we can apply for, like you said at the beginning of the show, or get approved for? Like you said at the beginning of the show, completely different with entrepreneurs that are 1099. Yeah. We go through the same format. The toughest one in that equation is what I'm going to be able to use as qualifying income. But I can tell you two things that really help the self-employed borrowers high credit scores. They're very good in compensating factor and good down payments. So, you know, trying to get maybe 10, 15, 20 percent even higher down goes a long way for self-employed. But the biggest thing is we're going to take a look at two years tax returns and typically we're going to average the income of those two years, either via a K-1 or either a schedule C in most cases. Now, if you have been self-employed for more than five years in that same industry of five years, there is a probability or possibility you could get away with a one-year tax returns where I don't have to average. So, for example, I've got one right now, John, where his 22 and 23 are not great, his 24 is really, really doing good. And he's got six years, so I was able to get a one-year, so we're waiting for his 24s to be done because I got a one-year tax returns for these 24 versus the 23. Yeah, so there's little creative ways there, but for the most part, the biggest challenge with the self-employed borrower is to get in and dig deep into it and figure out exactly what the monthly income will be that I can use. And I just, I had a, John, I had a trucker made 390,000 a year, but rode off 70 percent of the income, and I can't do it, you know, and that's-- Got it. But some of it you can, though, right? Every entrepreneur that has any assets, they're going to depreciate those business assets, which reduces the taxable income. But didn't you say years ago that you will add back in that depreciation? Depreciation and policing are two automatics. So there are other little ways to do things, but those two are automatic. So yeah, so a big depreciation line is beneficial. So if you're looking for a way to, you know, that's the one that gets added back in. Okay. Perfect. The other thing I want to mention too, John, the other thing I want to mention too, because you would think this would be obvious, but if you have a business, first of all, if you're scheduled to see, make sure you have a business name. Have a business checking account and pay the debt from the business. What I find a lot of times, John, is that the debt to the business, the borrower's paying out of their own checking account, I got to hit them with, I got to hit them with all that debt. So establish the basics. I mean, I'm not going to tell anybody what, you know, go to your accountant, but establish the basics and get the company to be paying for what it, what it should be paying for, not you as an individual. Okay. I want to squeeze in two more questions. One for me, one from Corey. So here's mine. Didn't you also say that, that what you like to see from a, an approval standpoint is a, like you said, a business structure LLC, S Corp, C Corp, whatever it may be, a formal business structure. Secondly, the entrepreneur taking a W two income from the, let's say the LLC, and then also taking K one or dividend income, which is taxed at a lower rate, isn't that the best scenario? Yeah, I can do both of those. We will probably most likely, if you have 25% or greater ownership, I've got to get corporate tax returns. But all they're doing is making sure that the business has the ability to, to generate the income. So it's a less scrutiny on the business, but those are great ways, John, absolutely K one's or the W two's through a CRS corporation. Perfect. Corey, wrap us up. 30 seconds. I was just going to ask about declining income because I would, I bet clients could cut that trap before declining year over year, but it sounds like maybe that five year rule eliminates that. Yeah. Yeah. That does help. That does help in a declining environment. Yeah, we've got a lot to decline the income year over year. There you go. Great job, boys. Oh, yes. Thank you so much. We will do it again tomorrow on the John Sanchez show. God bless. Have a great evening. This program was sponsored by Sanchez wealth management. The material in this program was intended as general information only and should not be taking a specific investment tax or legal advice. None of the information on this podcast was intended to be a solicitation for the purchase or sale of any security. Further information is available by contacting john@sansheswealthmanagement.com or 775-800-1801. John Sanchez offers securities and advisory services through independent financial group LLC, a registered broker dealer and investment advisor member FINRA SIPC securities only offered in states John Sanchez is registered in Sanchez wealth management LLC and independent financial group LLC are unaffiliated entities synergy one lending equal housing opportunity and MLS number one nine zero seven two three five Dwight Millard and MLS number two four one two five nine phone number seven seven five two four two two. 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