Home Loans for the Self Employed in LA
Interest-only loans and other risky lending practices were blamed by many for the financial crisis of 2007, and many of those risky lending practices have all but disappeared due to increased lending restrictions.
Interest-only loans have not. And thank God for the good of our entrepreneurial spirited, self-employed California dreamers who need their extra cash to pursue their independent small businesses and would find the payments of a fully amortized mortgage loan too cash flow restrictive. In the entertainment capital of the world this allows for more non-government dependent jobs to be created in the private sector, the backbone of America’s middle class.
According to a recent article in the LA Times, interest-only loans are making a comeback in California among affluent buyers with plenty of ready cash. This is in spite of the Consumer Financial Protection Bureau’s new rules which do not consider interest-only loans “qualified mortgages” – meaning lenders are not protected in the event of a default. But banks are not concerned about a default with the type of customer they are targeting.
According to the LA Time’s article:
Customers for such loans are often self-employed and capable of making big down payments and maintaining fat bank accounts. Banks believe such borrowers could afford traditional loans but want to maximize the cash available for other investments or ventures. Some borrowers just want the tax deduction available on the first $1 million a year in mortgage interest payments.
Lenders are willing to hold these interest-only loans as investments – something that did not occur during the housing bubble. The willingness of lenders to make non-qualified mortgages to the self-employed interested in buying houses for sale in LA is welcome news. Many people that live and work in LA, whether they live in houses in Bel-Air or condos in West Hollywood, are independent contractors or self-employed.
Los Angeles is a town that attracts artists, musicians and other creative types from around the world. Those jobs rarely come with a W-2, and the self-employed often have difficulty proving the stable work history that is required for many “qualified mortgages”– even if they are well-paid and have significant savings. The type of loan designed for the self-employed with a high net worth seems tailor made for a market like Los Angeles.
In addition to self-employed people interested in buying a house for sale in LA, there are many real estate investors that like to keep large cash reserves. Interest-only loans – with their comparatively low payments and other tax advantages – are ideal loans for investors that anticipate buying and selling Los Angeles real estate quickly.
Interest-only loans are an excellent option for those with the ability to make a significant down payment, but not all lenders are comfortable making this type of loan. If you are considering using an interest-only loan in order to buy a house for sale in LA, the services of a local real estate agent with connections with local lenders is essential. Contact me today and I will help you find the right lender and your dream home.
Susan Andrews | Estates Director
BRE License #01425843
Susan Andrews is your ultimate real estate source for Los Angeles, California and surrounding communities.
Photo courtesy of the LA Times.