Self-Employed Mortgage With One-Year Tax Returns Guidelines

This article covers Self-Employed Mortgage With One-Year Tax Returns Guidelines:

Traditionally, self-employed borrowers needed two years of income tax returns. However, self-employed borrowers can now get an automated underwriting system approval with one-year income tax returns:

  • Depends on the automated findings of the AUS
  • Traditional versus non-QM loans for self-employed borrowers
  • Bank statement loans for self-employed borrowers

There are more options for self-employed borrowers today than ever before.

The Automated Underwriting System Determines Number of Years of Income Tax Returns

Self-Employed Mortgage With One-Year Tax Returns Guidelines With Only One Year Proof Of Income:

If you are self-employed and seeking a mortgage, you may find that it is more difficult than you thought it would be. Affording a home that is right for you and your family can be tough when you are self-employed

It is a double-edged sword for self-employed individuals; you may need to claim high income on your federal tax returns and not take many write-offs to qualify. This is a double-edged sword because you are then forced to pay higher federal income tax.

In this blog, we will detail some alternative loan options Gustan Cho Associates at having available for our self-employed individuals.

Income Calculations for Self-Employed Mortgage with One-Year Tax Returns

Freddie Mac Self-Employed Mortgage With One-Year Tax Returns Income Calculations:

FREDDIE MAC– Most mortgage borrowers and many loan officers are not aware of Freddie Mac’s one-year tax return guidelines. Depending on your automated underwriting system findings, you may only need to provide your lender with one year of income tax returns.

The general rule of thumb is if your business has been around for over five years. The borrower normally needs to have a decent credit score. AUS like strong borrowers. If the self-employed borrower has a strong history of being self-employed, you should only need to verify one year of income tax returns.

Gustan Cho Associates do not have additional LENDER OVERLAYS on their conventional mortgage products. Many mortgage loan officers are not experienced with Freddie Mac guidelines.

Freddie Mac is More Friendly with Self-Employed Borrowers

Make sure you are working with an experienced loan officer who knows Freddie Mac’s Loan Prospector AUS (LP). For more on automated underwriting systems, please see our AUS BLOG. Freddie Mac’s program requires a credit score of 620 or higher.

The higher your credit score and the more assets you have available, the more likely you are to only need to provide one year of tax returns for income calculations. You should plan on a 5% down payment (as low as 3% if you are a first-time home buyer).

Conventional mortgages can have stricter competitive to FHA or VA financing. Please call us today to discuss qualifying for a conventional mortgage. Loan amounts are limited to $548,250  in most counties for the calendar year 2021. Please see our 2021 LOAN LIMIT BLOG for more information.

One-Year Tax Returns On Non-QM Loans

NON-QM Mortgages:

A one-year tax return loan program is available with non-QM mortgages. If your business has not been in existence for five years, we also have NON-QM mortgage loan options available. Assuming you have been in business for at least two years if you have the option to calculate your income on your most recent year of tax returns. This program can increase your buying power substantially.

In the first few years of a businesses’ existence, it can be difficult to turn a profit and even more difficult to show a profit on your federal income tax returns. Utilizing this program will allow underwriting to calculate income based only on your most recent year’s tax returns.

Non-QM Loan Program Eligibility Requirements

A few basic requirements for the non-QM loan program for self-employed borrowers:

Credit scores of 620 or higher.

  • 620 score requires a 15% down payment 
  • 660 or higher only need a 10% down payment
  • 30-day mortgage late payments allowed 
  • May require four months of reserves

Reserves are strong compensating factors on non-QM loans.

Non-QM Bank Statement Loans For Self-Employed Borrowers

What are the non-QM bank statement loans for business borrowers

NON-QM BANK STATEMENT LOANS:

If your business income is still struggling based on your most recent tax returns, we do have one more alternative. Bank statement mortgages do not require income tax returns.

Your income will be based on your business-related deposits shown on your bank statements. Depending on the loan program, your income will be calculated based on your most recent 12 or 24 months of bank statements.

This program is only available for self-employed individuals. You will need at least a credit score of 600 to use bank statements for income purposes. As stated above, these mortgages do not get tax returns involved, so you can continue to utilize as many write-offs as you would like.

Self-Employed Mortgage With One-Year Tax Returns On Jumbo Loans

Jumbo Mortgages for self-employed borrowers:

  • Qualifying for a jumbo mortgage as a self-employed borrower is even harder with the modern mortgage guidelines
  • A two-year history is a requirement and some jumbo products require a three-year tax return verification
  • We have bank statement loans available up to $3,000,000!

A bank statement mortgage is a great workaround if you have extensive tax write-offs.

To learn more about self-employed income calculations, contact us at Gustan Cho Associates. We are experts in self-employed mortgage lending. Since we are right in the heart of tax season for 2021, this is a great time that our clients can file a strong tax return and qualify for their dream home. Please give us a call with any questions surrounding self-employed mortgage qualifications. There are rumors out there that FANNIE MAE will soon follow suit with Freddie Mac and offer a one-year tax return option. Rumors of the privatization of Fannie and Freddie has not happened.

Choosing A Five-Star Lender With No Overlays

How to choose a five-star lender without overlays

Gustan Cho Associates is a full-service mortgage lender without lender overlays. We are able to help more clients than most lenders. If for some reason you do not qualify today, your loan officer will come up with a customized financial plan to help you qualify for your dream home as soon as possible. 75% of our clients have been turned down by the current bank or are not receiving the customer service they deserve. Please check out our reviews and subscribe to our YouTube CHANNEL to learn more about our team and to stay up to date with the changing mortgage guidelines! In today’s mortgage climate, lenders are more competitive than ever. We will do all we can to earn your business and offer top-notch customer service. We are available seven days a week for any mortgage questions, please reach out today.

Leave a comment