Bay Realty Blog

Self-Employed? What You Need to Know if Financing a Home

They make it tougher for the self employed to finance a home these days!

 

The more in advance that guidance from a Lender is sought and the resulting actions begin, the better ... and the more easily and quickly you will successfully navigate your mortgage process ...  Thank you  

 

Be ready and prepared once you find the home you are looking for!! Call me to help you find your lender and your HOME!

 

 

 

Self-Employed?

What You Need to Know if Financing a Home

 

As of June 11, 2020, changes in the processing of SELF-EMPLOYED borrowers have been implemented by Fannie Mae and Freddie Mac ...

Why?


The financial impact meted out by the COVID-19 pandemic.  Uncertainty has befallen many businesses and resulted in a disruption of normal underwriting and lending procedures. 

Many business owners have been/are/will be affected by "fallout" from the COVID-19 virus.  Social distancing, self-isolation(s), and stay-at-home orders have all been put into place as a result of the dangers of the pandemic.  

The Mortgage Industry is one of those that have been affected by the pandemic.  Newly-announced changes have gone into effect as a result of current events.  

Some of those changes that have taken place in mortgage underwriting involve or include:

  • Income Verifications:  Self-Employed borrowers' incomes are typically verified using the most recent two years of income tax filings.  In many instances, as a result of the pandemic, those incomes do not show a current or year-to-date accounting
  • Underwriting:  Mortgage Underwriters need to understand the "true picture" of a Self-Employed borrower's income and expenses BEFORE the next Tax Filing.  That information will need to be generated and documented in what is known as a Profit and Loss Statement (P&L)
  • Previously just recommended:  Now Profit and Loss Statements will be required for Mortgage Underwriting to review and approve loans for all Self-Employed(s) from the Application Dates of June  11, 2020, and after, until further notice  
  • Audited or self-generated Profit and Loss Statements: Borrowers will be required to provide self-generated/and signed Profit and Loss Statements to the current period in 2020.  (P&L must not be older than 60 days old, as of the note date)  

       

     These Statements must include info/reports regarding:
  • Expenses
  • Net Income (Including the most recent month preceding the date of Loan Application
  • 2 business depository account(s) statements (no older than the latest 2 months represented on the year-to-date Profit and Loss Statement)
  • Business Revenue
 
*  Until further notice, the above will be required on all Conventional Loan applications.
 
Mortgage Lenders will require that borrowers provide their 2 most recent bank account statements for review.  
 
 
These statements must support and/or not conflict with the info provided by the borrower in their current year-to-date Profit and Loss Statement.
 
Should supporting information be found lacking in some manner:  The Mortgage Lender is required to obtain additional statements or other documentation that will support the information provided from the current year-to-date Profit and Loss Statement.
 
The above can seem a bit complicated and confusing.  But the message (and my advice) to all Self-Employed considering a mortgage is actually straightforward and clear.
 
Self-Employed Borrowers are well-advised to seek out an experienced and knowledgeable Lender to discuss financing options well in advance of taking any action regarding:
  • The purchase of a home or investment property
  • The refinancing of their present home 
  • The seeking of a business or personal Line of Credit  
 
While this sound advice is always provided wisely, it is especially relevant in today's uncertain business environment.  By following this advice a borrower provides themself ample time to document your business revenues/activities thoroughly and to the best advantage as they pertain to application for financing.  
 
Think of it as "staging" or positioning yourself for loan application ...
 
The more in advance that guidance from a Lender is sought and the resulting actions begin, the better ... and the more easily and quickly you will successfully navigate your mortgage process ...
 
* Are you dreaming of buying or refinancing a home or Investment Property in New Lenox - Will County - Chicagoland - IL or WI?
 
 
Gene Mundt
 
Mortgage Originator - NMLS #216987 - IL Lic. 031.0006220 - WI License #216987
 
American Portfolio Mortgage Corp
NMLS #175656
 
 
Direct: 815.524.2280
Cell: 708.921.6331
eFax: 815.524.2281
 
 

 

  

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Gene Mundt

 Mortgage Originator  -  NMLS #216987    

                                 IL Lic. #031.0006220  -  WI License #216987                                                                                                    

NMLS #175656

 

Gene Mundt, Mortgage Originator,  40+ years of #mortgage experience, will offer you exemplary mortgage service and advice when seeking:  #Conventional, #FHA, #VA, #Jumbo, #USDA, and Portfolio Loans in #Chicago and the greater Chicagoland region, including:  The #Lincoln-Way Area, #Will County, (#New Lenox, #Frankfort, #Mokena, #Manhattan, #Joliet, #Shorewood, #Crest Hill, #Plainfield, #Bolingbrook, #Romeoville, #Naperville, #Wilmington, #Peotone, etc.), #DuPage County, the City of Chicago, #Cook County, and elsewhere within IL and Wisconsin. 

 

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Comment balloon 9 commentsDebra Leisek • June 19 2020 09:21AM
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