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Valued Member
Posts: 40
Registered: ‎05-05-2008
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Loan programs with only 1 year self employment?

Are there any programs for those of us who have been self employed between 1 and 2 years? I became self employed 11 months ago ago but had so little income to report on my taxes after deductions in 2007. This year, I'm on track to make, conservatively, 40k and potentially (if the next 5 months are like the last 7 months), 45k. I plan on taking few deductions (just allowing for depreciation). Working on credit and should have scores in the mid 600s by the time I'm looking to buy, which will be once I file my taxes just after the first of the year. By that time, I'll have about 13-15k saved. Houses I'm looking to buy are priced, on average, at about 75k. I just wont have 2 full years of self employment income yet. Since I'm looking for a home that is so inexpensive (compared to my income) and will have a large ammt for down payment, would I be more likely to get qualified? Would they take my 1 year income and divide it by 24 months to figure out my monthly income? Even if they do that I think I could still qualify but I didn't know if that was out of the question. Or are there programs that will take 1 years tax returns?

Starting Score: Trans: 561 EQ: 547
Current Score: TU: 650 EQ: 665 EF: 661
Goal Score: 700

Valued Member
Posts: 44
Registered: ‎06-02-2008
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Re: Loan programs with only 1 year self employment?

We were in a similar situation.  My husband is not self employed, but is paid commissions and bonuses.  We were told that we would have to wait until we had two years of tax returns.  But I called around and asked different brokers, telling them we had a large amount to put down and have large reserves.  We had three different brokers ask their underwriters if we could get approved and the UW's said we could.  From what I understand, if other parts of your file are strong (large down payment, large reserves, good credit), it can get done.  But you will have to ask around, and make sure it's the underwriter who says they can get it done.
Super Contributor
Posts: 7,915
Registered: ‎07-03-2007
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Re: Loan programs with only 1 year self employment?

[ Edited ]
From the FHA manual

The following conditions apply to underwriting self-employed borrowers:

A. Minimum Length of Self-Employment. Income from self-employment is

considered stable and effective if the borrower has been self-employed for two or

more years. The high probability of failure during the first few years of a business

makes the following requirements necessary for individuals who have been selfemployed

less than two years:

1. Between One and Two Years. An individual self-employed between one and

two years must have at least two years of documented previous successful

employment (or a combination of one year of employment and formal education or

training) in the line of work in which the borrower is self-employed or in a related

occupation to be eligible.

2. Less than One Year. The income from a borrower self-employed less than

one year may not be considered effective income.


Not easy. You will absolutely have to use tax returns. That means write-offs reduce income.

Message Edited by DallasLoanGuy on 07-26-2008 05:41 PM
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Regular Contributor
Posts: 112
Registered: ‎05-16-2007
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Re: Loan programs with only 1 year self employment?

I think that it will be extremely tough right now. However seeing as you are looking at a low priced home perhaps consider a private lender or a hard money lender. I have one rental house with a 77,000 loan @ 15% which runs around 960 per month. If you do something like that make sure you get at least a 2 year loan then you can do a rate and term to bring it down. Look for a loan with the least points and prepays.

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