Self Employed Loans
Guidelines for self-employed home buyers have loosened up. For example, you may only need one year of income tax documents to prove your income, as long as your application to a lenger qualifies for “automated underwriting.”
Lenders are using a new income calculation for business owners with little or no history of distributions.
The new loan guidelines are also more friendly toward the “moonlighters.” (Think Uber drivers) Those with side gigs don’t always have to document this income if they qualify using only their day job.
When you are buying, you go through a set of steps as part of the application process.
What do lenders focus on for a Self Employed Loan?
What trips up self-employed applicants is that they might say they earn $6,000 per month, but their taxable income might only be $4,000 a month.
Underwriters use a complicated calculation. They start with your taxable income, adding certain deductions such as depreciation. But, they might also subtract extraordinary or windfall income. If it’s not stable or ongoing, you usually can’t use it to qualify for a home loan.
How long do have to be self-employed to be able to get a loan?
You may not have to show a 24 month self employment history to get a mortgage. For instance, the secondary market of Fannie Mae says that you may qualify with 12
months of self employment if you have previous experience in that field, and your income is at least as much as you earned in that field before becoming self-employed .
What documentation do I need to get a loan?
Tax professionals are quite familiar with these documents and the requests for a mortgage. Your CPA may even be able to email you all your required documentation the same day you place the request!
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