Getting a Mortgage When You’re Self-Employed

Fannie Mae announced stricter guidelines for self-employed borrowers at the beginning of the COVID-19 pandemic. These guidelines require borrowers to provide current profit-and-loss statements and bank statements for the last three months to verify self-employment income. These additional steps were enacted to ensure that self-employed borrowers had not been negatively affected by the pandemic.

These new guidelines can be an obstacle for self-employed borrowers, as they may result in additional expenses if the borrower needs a certified public accountant (CPA) to prepare their profit-and-loss statements.

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

Lenders need to confirm the existence of a 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 are able to provide lenders with the following to verify the existence and 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.

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