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New Rules - FHA Changes rules for Self Employed borrowers

Reblogger Emily Medvec

Real Estate Broker/Owner with eXp Realty LLC NM Broker License 16161

March 15, 2012 07:41 AM

Given there are so many self-employed people in Santa Fe and most likely nearly every community given the economy, I found this information about the FHA new rule changes for self-employed borrowers both helpful and staggering. I am still wondering in the end who benefits by the rule change?

FHA Changes rules for Self Employed Borrowers

Documentation Requirements for Self-Employed Borrowers – Effective for all case numbers ordered on or after April 1, 2012 except non-credit qualifying streamlines and HECMs.

Documentation Requirements for Self-Employed Borrowers

Self Employed borrowers will need P&L and Balance Sheet if more than a calendar quarter has elapsed since date of most recent calendar or fiscal-year end tax return was filed by the borrower – with no exceptions.

Additionally, If income used to qualify self-employed borrower exceeds a two-year average, need audited P&L or signed quarterly tax returns obtained from IRS are required.

So as you can see after April 1st things are tightening up - so if you have a SE borrower in contract on a short sale and it is closing after 4/1/12 you need to have their lender re- review everything. Their expenses will be heavily scrutinized going forward - don't let this rule change affect your future closings.

Thanks for stopping by and reading my blog: FHA Changes rules for Self Employed Borrowers

This Active Rain post is by Mark Taylor, to get your free mortgage approval please call 602-361-0707. Please click on the links below to view my AWESOME websites!

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Ginny Gorman

RI Real Estate Services ~ 401-529-7849~ RI Waterfront Real Estate - North Kingstown, RI

Homes for Sale in Southern RI and beyond

Good re-blog Emily...phew I just had one close under the wire on a self employed borrower!

Mar 15, 2012 10:31 PM

Emily Medvec

eXp Realty LLC - Santa Fe, NM

Broker | Realtor | Serving Santa Fe & Northern NM

I suspect we just had our last one for a very talented self-employed artist. I can imagine the art they would create with a P/L statement. Entrepreneurs build our local economies by taking risks, frequently starting their busineses anyway they can. When they are successful, they create jobs, spend money in the local economy etc. There is no need to bury them in paperwork. Tax returns should be sufficient.

Mar 15, 2012 10:38 PM

Joshua Zargari

MJ Decorators Workshop LI staging and home decorating - Lynbrook, NY

MJ Decorators Workshop

Hi Emily.

Thank you for sharing.

Have a nice weekend.

Mar 16, 2012 04:47 AM

Silvia Dukes PA, Broker Associate, CRS, CIPS, SRES

Tropic Shores Realty - Ich spreche Deutsch! - Spring Hill, FL

Florida Waterfront and Country Club Living

Emily, another hurdle to jump over in order to qualify for FHA financing for those who are self-employed. It's amazing how governmental agencies can dream up ever increasing paperwork.

Mar 16, 2012 05:32 AM

Virginia Kail

Investments, starter houses, luxury homes,farms, acreage - Cookeville, TN

True Blue Realty, Homes and Land for Sale

Emily, It applies to most of us too. Both myself and my hubby are self employed. I've reached the conclusion we may be in our house for a while, given that non-traditional loans are a thing of the past. I sometimes think it would be easier to just save up the cash than go through the loan process when self-employed!

Mar 16, 2012 09:09 AM

George Souto

George Souto NMLS #65149 FHA, CHFA, VA Mortgages - Middletown, CT

Your Connecticut Mortgage Expert

Emily Investors have been requiring this documentation on all loans for a while now, even if FHA didn't. Apparently FHA just got the message :)

Mar 16, 2012 10:25 AM

Joshua, thanks for stopping by. Hopefully you will pass this info forward.

Silvia, every day it just make more and more sense to save and pay cash.

Virginia, given the options of innovating to be self-employed vs not being employed, one would think there wold be a range of ways to evaluate and determine if a buyer is solid.

George, thank you for the update. We recently closed a self-employer buyer. Their lender, one of the big 5 national banks did not require a profit/loss statement. Perhaps there may be differences within the local markets. Thank you for the comment on what is becoming standard in mortgage financing.

Mar 16, 2012 01:22 PM

New Rules - FHA Changes rules for Self Employed borrowers

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