Many of my clients are self employed and get very frustrated with all the lending rules. Understandable because self employed borrowers tend to manage funds and credit and aren't used to having to explain every minute detail to a lender as their good credit and assets were there ticket to credit in the past. In 2012 not so anymore, SEB's need to be more thorough and diligent in the level of deductions, income claimed and expenses spent. So make sure you get in touch with your lender before you even get into you agents cars - if you don't you may be sorely dissappointed.
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
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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