Hello, I have a question. For those of you that trade for a living, what's the best way to reflect this as legitimate employment? For example, when you go buy a car, house, or even rent for that matter, they want to see a solid job history, and self employment can many times not be acceptable to some. When trading funds within an LLC, I assume you could pay yourself a fixed amount of trading profit (assuming its there) and claim this as an hourly wage? Just learning about all this stuff so please excuse my ignorance
Several years of tax returns does the trick in almost all cases. Sometimes be prepared to make higher down payments. Having a credit score over 725 with at least 1 loan on your history is a definite plus.
This is what really counts. Banks are more concerned with your credit score and your loan history (same as credit score I guess) than your occupation. If you have stable income from trading and a high credit score you shouldn't have a problem. Getting a mortgage on a house, however, would probably be an ordeal, especially if you're a first time buyer.
One of the downsides of self-employment is that lenders typically want to see two years of tax returns as proof of income (as opposed to showing a pay stub if you're in a regular job). It doesn't really matter whether you trade as an individual, LLC, s-corp., etc. If you have a corporate structure you could use ADP for your payroll and have a legitimate looking pay stub, but you would still need to disclose that you're the owner (then you're back to two years of tax returns). Small-business owners who are just starting out are victims of this sub-prime mess just for the fact that they would typically apply for a mortgage using a no-doc, low-doc, or stated-income approach. I personally blame the borrowers more than the lenders for the current mess, but the net result is the same: responsible people who legitimately need low-doc loans are now much less likely to be approved for a mortgage, regardless of the interest rate. I am a computer programmer (and aspiring full-time trader) and I've had my own s-corp for seven years with a stable six-figure income from this activity. In the fall of 2005, I switched from being a W-2 contractor for my primary client to being an independent contractor (corp-to-corp) -- same client, same level of effort, more money. This was financially advantageous in many ways, except when I decided to refinance my home in January 2006. Even though I was working for the same client I had been for the past several years and making more money than before, I couldn't produce a pay stub (I was no longer their employee) and I couldn't demonstrate two years of returns with sufficient business income (for the prior two years I only had small amount of revenue through my s-corp from ancillary clients -- 90 percent of my income was from wages). I had no choice but to apply for a stated-income loan (I could document my assets, so that didn't put me in the no-doc realm, the so-called "drug dealer" loan). Fortunately, this option was available to me from several lenders, and in the end my interest rate was only about a quarter point higher than a conventional, full-doc loan (although I did have to pay an extra half-point at closing). Given the same circumstances, I have doubts that I would have been able to secure any loan in today's lending environment, despite excellent credit, documented assets, etc. These stated-income loans were abused by borrowers who knew they had insufficient income for the mortgage they were opening, but assumed that rising home values would save their asses. I also fault the educational system in this country for not teaching kids the basics of personal finance so they can intelligently review and understand mortgage documents before they sign them -- it's ridiculous. Anyway, I'm sorry to turn the answer to your question into a soap-box speech. Good luck. Regards,
you never say stock trader. you say you OWN an equities firm. your firm trades equities on the new york stock echange as well as the nasdaq. you say you do what goldman sachs proprietary trading separtment does but on a smaller scale bla bla bla.sounds very sophisticated.
Good question, things have changed the no-doc is hard to get now. If you go for a car shouldn't be an issue but a House you will have to show 2 years tax return even for a personal loan.form 4056-T, is what they will ask you to fill out. You need good credit over 700 plus the proof of income as they look at it as capitol gains and not working income.