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Self Employed 101

September 3rd, 2020 9:38 AM by Salim (Sam) Kader MLO# 130505

It's nice to be your own boss and determine your own destiny. However, there may be some disadvantages to generating your own income when it comes to applying for a home loan.

Here's what lenders are looking for approval:

  1. Due to COVID-19, effective 6/11/20 -  self-employed borrowers are required to provide Year-To-Date Profit and Loss.
  2. Enough Net Income shown on Tax Returns to qualify for the last 2 years obtain directly from the IRS - Form 4506-T (see special program below).
  3. 2 years of self-employment history proven with regular income stream.  Former Fed chairman Ben Bernanke was denied refinancing in September 2014 because he couldn't proved that he has been receiving self-employment income since he retired from the Federal Reserve in January 2014.
  4. If income decline by less than 20% from prior year, lender may qualify based on the higher income and a year-to-date profit and loss statement from an accountant.
  5. A copy of business license, or website address or letter from an accountant or CPA stating the business has been existed for at least 2 years.
  6. 2 years self-employment requirement may be waived (depending on lenders) if prior W2 employment  is in the same field. Profitable current Year-To-Date profit and loss statement may also be used if self-employment period is less than 2 years.
  7. Business debts that are paid for personally will be counted against your Debt-To-Income ratio.

Self-employed people or retirees with substantial current assets or retirement accounts may use those assets for income qualification. Do consult with us first.


Posted by Salim (Sam) Kader MLO# 130505 on September 3rd, 2020 9:38 AM



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