Documentation Requirements for Self-Employed Borrowers – Effective for all case numbers ordered on or after April 1, 2012.
1. All FHA files for self-employed borrowers require a YTD P&L AND Balance Sheet for every business covering the time from the last files tax return to the end of the most recent quarter – NO EXCEPTIONS
2. Annual earnings that are stable or increasing are acceptable. Earnings reflecting a significant decline in income over the analysis period (25% or more) are not acceptable for use, even if the current income and debt ratios meet FHA guidelines.
3. Also, please note that FHA still will not allow the add-back of expenses for business use of home when calculating Schedule C income.
I hope this helps to clarify the new requirements. Call me anytime for the latest info as it hapend and sometimes before it happens!
Thanks for stopping by and reading my blog: FHA Changes rules for Self Employed Borrowers -ROUND 2