HUD Self-Employment Guidelines On FHA Home Loans
HUD Self-Employment Guidelines allow self-employed borrowers to qualify for FHA loans. The borrower needs to have been self-employed for the past two years. Income and employment are one of the most important factors when qualifying for a mortgage. Lenders want to see and believe the borrower has the ability to repay their new mortgage loan after closing.
Mortgage Underwriters Are Concerned With Self-Employed Borrowers Past Two Years Of Adjusted Gross Income
Self-employed borrowers have added layered risk under the eyes of the lender. Statistics and data show that the first two years in any business start-up or commissioned job is the riskiest. If the person survives the first two years of being self-employed, the chances are they will be successful. W-2 wage earners are guaranteed their income by their places of employment. Due to the added risk on self-employed people, mortgage underwriters scrutinize self-employed borrowers more so than W-2 wage earners.
How Mortgage Underwriters Calculate Self-Employment Income When Calculating Mortgage Borrower”s Qualified Income
The best indicator of continued employment of self-employed borrowers is mortgage underwriters will determine the borrower’s ability to repay their new mortgage by looking at the prior two years of income and employment history. Self-employed people need to have been self-employed in the same business for the past two years. Mortgage underwriters will analyze and review the past two years’ income tax returns and see the trend of the borrower’s income. Some red flags underwriters will look for are declining income and/or irregular income. Lenders will average the past two years’ adjusted gross income of the borrower’s federal income taxes when calculating qualified income for self-employed borrowers. Underwriters will look at the amount of unreimbursed business expenses and the qualified income they will use is the adjusted gross income on their income tax returns.
In this ARTICLE, we will discuss and cover Self-Employment Rules And Regulations On FHA Home Loans.
HUD Self-Employment Guidelines: How Are Self-Employed Borrowers Qualified
Per HUD Self-Employment Guidelines, mortgage underwriters need to review the borrower’s income tax returns for the past two years.
Here are the basic HUD Self-Employment Guidelines On FHA Home Loans: