Using Self-Employment Income when Applying for a Mortgage Loan
When applying for a home mortgage loan, your employment and income are important factors when determining loan approval. Underwriters will need to determine that your income is stable and that you will be able to make your mortgage payments in the future. This holds true for people who are self-employed as well. If you have 25% or more ownership in a company you are considered self-employed by Fannie Mae.
As with everyone else applying for a home loan, a self-employed person will also have to go through the employment verification process. You will need to provide information that shows you have stable income, the nature of your business and the financial strength of your business.
Fannie Mae typically requires an employment history of at least two years for potential homebuyers. Borrowers will need to provide all pages of their federal tax returns for the last two years. If you own more than 25% of a corporation or partnership, you will need to provide business tax returns for the last two years as well.
A person who has been self-employed for less than two years may still qualify for a home loan if their most recent self-employed federal tax returns show income sufficient to support the new mortgage payments and they have prior job experience in the same field. An example of this may be a CPA or attorney who worked for a larger firm but then decided to open his or her own firm. In this case, a self-employment history less than two years (but not less than one) may be considered.
Although there may be a few extra hoops for you to jump through, being self-employed is not a hindrance when applying for a home mortgage loan. If you are self-employed and looking to purchase a home feel free to contact United Home Loans today with any questions you may have.