Self Employment Mortgage requirements?

[book1773]

I am trying to obtain some feedback if anyone can be kind enough to help me. I have a friend who has

a 720 credit score across the board no baddies, no tax liens ect and all credit cards paid down to $0.00

no open car loan either and is self employed. What is the requirements to get approval with self employment?

Is it 2 years self employ tax returns or can it just be 1 year. I have been hearing that if

you are self employed your business needs to be in operation for 2 years or more but what

if you are self employed not by a business you own but as income comming in under your

own name?

Any help would be great. I know the banks are a lot more stick then

before. Also are the banks less strick with income if you put 20% down suppose to

a FHA of 3%

[Mike_B03]

They go by two years of tax returns if you are self employed and self employed is defined as owning 25% or more of a business. They will also want a Profit and Loss Statement in most cases. 

Biggest challenge with most self employed borrowers is the debt to income ratio because most business owners deduct as much as they legally can, but this can pose a problem when trying to qualify for a mortgage.

[book1773]

Thanks for the feedback. I have a question? So if you put 20% or FHA 3% there is

really no difference with income verification. They will want to see 2 years returns or can

it be 1 year? Also lets say you do not own a business but people pay you as a indpendent

contractor and they pay you by check in your own personal name. 

[Mike_B03]

I believe it's 2 years if you are a 1099 contractor, which is basically self employed. 

As for the down payment, if you put down 20% then you're probably looking at a conventional loan vs FHA, so the requirements will be different but usually FHA i smore lenient. 

[courtney091082]

I'm self employed and purched Oct 2012, as far as I know they wanted 2 years.

I had excellent credit and I had to have 3 letters from the 3 companies I'm self employed through stating my start date when I worked for them (my self employment was through 3 international companies, if I was employed USA it woudl have been considered 1099).

Plus they pulled my past 3 years in tax forms, but I know some just pull 2 years becaue I'm pretty sure that's what they need is 2 years.

It was a very easy process for me, and we landed a rate of 2.875% no points 30 yrs FHA it was the right time to buy for us LOL 

I would tell your friend to call around and talk to some lenders, it's worth a shot!

[sandrachicago]

courtney091 which lender did you choose? thanks.

[Ron6262]

   I just went throught this nightmare with my GF.  We tried to buy a home together.  She is self employed owns 50% of a business, had 780 mid score and zero debt.  I qualified for the house based on my income alone, didnt even need hers.  We went through a broker, first place he tried pre approved us, then later washed us out because we couldnt provide a certified letter from a CPA that had done their tax return.  She does her own return.  We even went to a business attorney that I have used for years and he wrote a letter stating that he had reviewed her returns for the last three years, and he has consulted with her on her tax filings, it wasnt good enough.

   We went to the second lender, again pre approved.  Washed out this time bec she is not officially incorporated under an LLC or a Co.  She simply uses her name.  They wanted LLC or Inc. paperwork.  It was such a hassle I just bought the home myself and left her off the loan, she was really bummed, but it was too much a hassle.

    I would say have your taxes straight, two to three years, have a current profit loss, they wanted and updated to the most recent quarter statement.  I assume most have an LLC or an Inc., so that typically shouldnt be a prob.

[Mike_B03]

Yep, went through some of the same things, such as the letter from our accountant. I can see their logic in a way, if you do your own taxes, what is there to stop someone from just putting in whatever numbers they want? But at the same time, you could give your accountant whatever numbers you want, they just go by what you give them. 

It does suck getting a mortgage if you are self employed but it is possible!