Self-Employed

selfemployed

Self-Employment Mortgages Rules

For the 14-million self-employed borrowers nationwide, it’s getting easier to secure approvals for a mortgage loan.
Recently, Fannie Mae issued new loan guidelines related to self-employment income. Some of the highlights include a documentation reduction from two years of federal income tax returns to one, in certain cases; and, a new income calculation for business owners with little or no history of distributions. The new loan guidelines are also more friendly toward “moonlighters”. Borrowers with self-employment income from a second, non-salaried business are no longer required to show proof of income if they’re qualified based on the income from their “salaried” job.

Getting Approved For A Mortgage When You’re Self-Employed

When you’re buying a home or doing a refinance loan, there are specific steps to get approved for mortgage. The application will require information regarding your annual income, your savings, and your debts; as well as your employment history and a record of where you’ve lived. However, the underwriting process varies from applicant-to-applicant and loan-to-loan. The documentation required by an underwriter is different for every mortgage borrower. For self-employed borrowers — especially — documentation requirements can seem onerous. In addition to the typical requests for bank statements and credit reports, self-employed borrowers are required to show federal income tax returns and additional documentation showing the vitality of their respective businesses. Recently, though, self-employed borrowers have caught a break. Lenders have recently reduced the required paperwork for self-employed borrowers. For some with “second jobs”, the paperwork requirement is now waived altogether.

Mortgages For Self-Employed Borrowers

Fannie Mae has been working with a looser set of guidelines for the nation’s self-employed borrowers. The policy updates encompass three areas :
⦁ Self-employed borrowers with no history of “taking paychecks” (i.e. business distributions are irregular or non-existent)
⦁ Self-employed borrowers who don’t have two years of federal tax returns to support their business
⦁ Salaried borrowers with a second, self-employment job for which the income is not required to qualify
For self-employed borrowers with a history of paying themselves, new mortgage guidelines state that the borrower must only have access to the business income; and, that the business shows adequate liquidity to support income withdrawals.
In general, to prove you have access to business income, a letter of incorporation or K-1 filing which states your ownership percentage will suffice. For self-employed borrowers without two years of federal tax returns, guidelines have been loosened to allow one year of returns, provided that those returns show 12 months of self-employment income and that a cash flow analysis of the business appears sound. The third provision may be most welcome to self-employed mortgage borrowers — especially those who don’t rely on their “side business” to support their home or household. Under Fannie Mae’s new rules, borrowers qualifying for a mortgage using the income of their “salaried” job are no longer required to provide proof of income for their self-employment. This provision applies to borrowers living off retirement income, social security income, pension payments, and/or dividends as well.
If your mortgage application shows sufficient household income sans self-employment dollars, the requirement to show federal income or corporate tax returns as it relates to self-employment can now be waived in underwriting.
Note that these rules apply to conventional home loans only. Guidelines for FHA and VA loans may be different.

Turbo Mortgage

Turbo Mortgage, LLC is a Technology, Marketing, and Mortgage Education company.Sammy Ray Trantham (NMLS #208667) performs licensed origination settlement services sponsored by LendMoney Mortgage Services, LLC, (NMLS #221869) using the assumed name of Turbo Mortgage with the consent to Turbo Mortgage, LLC.

Sammy Ray Trantham
NMLS #208667
1202 Lakeway Blvd., Suite 5B, Lakeway, TX 78734

LendMoney Mortgage Services, LLC
NMLS #221869
4727 Andover St.
Sugar Land, TX 77479-3946

Instagram

top
Copyright © 2016 Turbo Mortgage. All rights reserved.

CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV