Getting a Mortgage for Self-Employed Borrowers is Easier Than Ever

Buying a home just became easier for self-employed borrowers. 

When COVID-19 first began, Fannie Mae announced stricter guidelines for self-employed borrowers. These guidelines required current year profit and loss statements in addition to bank statements for the past three months to verify self-employment income. The additional steps were enacted to insure that self-employed borrowers had not been negatively affected by the pandemic. 

These COVID-related guidelines were an obstacle for self-employed borrowers, sometimes resulting in additional expenses if the borrower needed to have their certified public accountant (CPA) prepare the profit and loss statements. 

If borrowers can provide federal income tax returns from 2020 and 2021, lenders may follow standard Selling Guide policies for self-employed income which do not require the borrower to provide the profit and loss statements. If you have been self-employed for more than 5 years only one year’s tax returns are required.

Lenders will still need to confirm the existence of the borrower’s business within 120 days prior to the note date, as well as operation of the business within 20 days of the note date. 

Borrowers can provide the following to verify the operation of their business:

• Evidence of current work, including signed invoices and executed contracts.
• Evidence of current business receipts within 20 days of the note date, such as payment for services performed.
• Business website demonstrating current activity and operations, including appointments, estimates, and services to be scheduled. 
• Lender certification of open and operating businesses, including confirmation through a phone call or other methods of communication.