Self employed borrowers applying for a mortgage loan can get frustrated because many loan officers do not know how to accurately read tax returns.
Fannie Mae is the largest purchaser of conventional mortgage loans. Since stated income loans no longer exsist it's important to know their requirements.
Here are the guidelines from Fannie Mae:
Income from self employment is considered stable, and effective, if the borrower has been self employed for two or more years.
Due to the high probability of failure during the first few years of a business, the requirements described below are necessary for borrowers who have been self employed for less than two years.
If the period of self employment is between one and two years: To be eligible for a mortgage loan, the individual must have at least two years of documented previous successful employment in the line of work in which the individual is self employed, or in a related occupation.
Note: A combination of one year of employment and formal education or training in the line of work in which the individual is self employed or in a related occupation is also acceptable. If less than one year then the income from the borrower may not be considered effective income.
Speaking of income, the method for calculating self employed income is much different than that of a wage earner. Failure to calculate income correctly can cause your loan to be denied by an underwriter.
Self employed borrowers need a company with qualified loan officers that know how to read self employed tax returns and make a determination of your eligibility before you pay for home inspections or appraisals. Look no further because we can help!