Mortgage For Self Employed Borrowers Qualification Guidelines
This BLOG On Mortgage For Self Employed Borrowers Qualification Guidelines Was UPDATED On January 3rd, 2019
Mortgage For Self Employed Borrowers has been very difficult since the Great Recession of 2008 and the real estate meltdown.
There are two types of mortgage for self employed borrowers:
- Bank Statement Mortgage Loans
- One Year Tax Returns For Self Employed Borrowers On Government And Conventional Loans
Bank Statement Mortgage For Self Employed Borrowers
The Gustan Cho Team at Loan Cabin Inc. launched our bank statement mortgage for self employed borrowers:
- No doc loans became obsolete
- Stated Income Loans, once very popular with self employed borrowers, came to an abrupt end
- The great news is that mortgage for self employed borrowers is now possible with our new bank statement mortgage loans for self employed borrowers
- No tax returns are required with bank statement loan programs
- Either 24 months personal or business bank deposits is used to average monthly gross income
- If 24 months bank statements are used, then 50% of deposits can be used
- If personal bank statements are used, then 100% of deposits can be used
- Needs to be 24 months bank statements from the same bank
- No overdrafts in bank statements
- 20% down payment on home purchase
- 10% down payment allowed for borrowers with at least a 720 credit score
The Gustan Cho Team at Loan Cabin Inc. are correspondent lenders on bank statement loan programs and now offers mortgage for self employed borrowers with our bank statement loan program.
Importance Of Income When Qualifying For Mortgage For Self Employed Borrowers
Income is probably the most important factor when it comes to getting approved for a residential mortgage loan.
- Borrowers can have perfect credit but with no income verification, there is no way they can qualify for residential mortgage loans
- Borrowers can have had prior bad credit and/or no credit but without income borrowers will qualify for home loans
- Those with recent bad credit and/or late payments may have to wait a few months to get credit re-established and/or correct credit
- But as long as they have documented qualified income they can qualify mortgage loan approval depending on credit
- It is not if borrowers will get a mortgage loan approval, but a matter of when they will get the mortgage loan approval
- There are various types of income types which we will discuss in the next paragraph for mortgage programs for self employed borrowers
Types Of Income
There are various types of incomes when it comes to mortgage qualification requirements.
- Cash income does not count as income
- All income types needs to be documented and reported to the Internal Revenue Service
- Lenders will verify tax returns and/or W-2s, and/or 1099’s
- Those who are hourly or salaried employee and get W-2 income have no problem when it comes to qualifying for home loans
- Borrowers can also have gaps in employment if they are a W-2 employee
- Folks who have been unemployed for six months or less need 30 days of pay check stubs from new employer to be able to qualify with the income from new job
- Folks who have been unemployed for six or more months need to have been on new job as a full time employee for at least six or more months to qualify for a residential mortgage loan
- However, borrowers who are a 1099 employee or are an independent contractor and/or are a self employed normally need two year of tax returns in order to qualify for a mortgage
- Mortgage For Self Employed Borrowers are tougher to qualify than W-2 wage earners
Mortgage For Self Employed Borrowers: One Year Tax Returns With Freddie Mac
As mentioned earlier, self employed borrowers normally have a tougher time qualifying for mortgages than W-2 wage earners.
- In general, Mortgage For Self Employed Borrowers require to provide two years tax returns in order for them to be eligible to qualify for mortgage loans
- Fannie Mae’s Automated Underwriting System will not issue an approve/eligible per DU FINDINGS unless self employed borrowers have two years tax returns
- However, Freddie Mac’s Automated Underwriting System will allow self employed borrowers one year’s tax returns per LP FINDINGS if the mortgage loan applicant is a strong mortgage loan applicant
- For example, if the mortgage loan applicant has the following:
- Long term as self employed
- High credit scores
- Good income
- Large down payment
- Substantial in reserves
- It is very likely that Freddie Mac will only require one year tax returns for self employed borrowers per Automated Underwriting System
However, if the self employed borrower has low credit scores, prior bad credit, low down payment, little to no reserves, high debt to income ratios, then the one year tax return requirement will not most likely apply.
Qualifying For Mortgage For Self Employed Borrowers is now possible with our bank statement mortgage loans for self employed borrowers. Self Employed Borrowers who need to qualify for mortgage with a direct lender with no overlays on government and conventional loans can contact us at The Gustan Cho Team at Loan Cabin at 262-716-8151 or text us for faster response. Or email us at email@example.com. We are available 7 days a week, evenings, weekends, and holidays.