Self Employed Income Post COVID Shutdowns

Mortgage and Lending with HomeBridge Financial Services (NJ) NMLS 248937


As we have businesses opening after state mandated shutdowns we have new methods to follow for self employed borrowers/buyers.

Pre-Pandemic we would use the past two years Federal tax returns and average income or sometimes, if the most recent year was lower, we would use the lower of the two years. We would also ask for a Profit and Loss, but mostly just to show the business was still running this year- and it was more to show the trend than any actual income for the current year.

As businesses are reopening the mortgage industry has new guidelines to follow to prove the business is "back".  

We are now heavily relying on a YTD P&L along with 2-3 months business statements to show income for this year and if it is lower than previous years that is the income we will be using to qualify. as an example- a June 30 P&L showing a loss will have that 6mo average used - Bank statements that are not showing any cash flow into the accounts will be looked at more than a P&L.  PPP Loans and Grants will not be allowed as sources of income, Cash-flow out of accounts will be factored into the income stream from the bank accounts as well..... All will be averaged over a 2-3 month period. Ideally the P&L should match bank statements within allowable tolerances- and should be "back" for at least 2 months to prove they will survive.

This is the case for ALL self employed buyers/borrowers, even for businesses that may not have been shut down.  So if a business is having a slow start to the year it will not bode well for qualifying.

For businesses that were closed there can be big issues with the year to date incomes and issues with qualifying.

It has always been a more involved process to qualify a self employed borrower and never should be a last minute weekend project. Now, more than ever, self employed buyers NEED full preapprovals by providing additional paperwork PRIOR to their house hunt.

That list should Include:

  • Last two years Federal tax returns with all schedules for both personal and business
  • YTD P&L
  • Last 2-3 months business statements

With the above your loan officer can fill out income worksheets to determine qualifications.


This is an ever evolving world of qualifying, and in the beginning of the shutdowns we had no idea how we were going to treat these buyers.  Did we just need them back to work? or...?  and now we know there is a new method to follow that can often be confusing and difficult.  So allow some extra time and a little more patience PRIOR to shopping for a home.


Call me for all your residential lending needs!


Robert Rauf 
Mortgage Loan Originator NMLS# 248937 
or my blog: 
Office: (732)908-4868  Cell (732)740-0175

Since 1987 I have been helping my clients fulfill their dream of home ownership! HomeBridge Financial Services, Formerly REMN, HomeBridge Financial Services is located at 9 Grand Ave, Building 2 Suite A Toms River, NJ 08753. NMLS #6521. New Jersey Licensed Lender and Mortgage Banker #L041053. Visit for more information. NJ Mortgages, New Jersey Mortgages, Mortgages in NJ, mortgage in New Jersey, Mortgages in New Jersey, Toms River NJ 08753, Toms River NJ 08755, Brick NJ 08723, Brick NJ 08724 Mortgage in Ocean County NJ, Mortgage in Monmouth County NJ, Jackson NJ 08527, Howell NJ 07731, Lacey 08731 08734, Beachwood 08722 Bayville 08721, 




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