Self Employed Borrowers 2020 Additional Requirements

Buying a home or refinancing a mortgage in 2020 has additional requirements for self-employed borrowers you need to be aware of if you are self-employed and looking for a mortgage. Covid has changed the way we live, and lenders are keenly aware of this.

Businesses that were doing great in 2019 may have been shut down for a portion of 2020 so income from 2019 alone is not an accurate barometer of the business’s health. It makes sense when you think about it. The world pre Covid was a different place.

You could walk into restaurant, go to a movie and get your teeth cleaned. Now many industries are shut down or have serious restrictions which have affected the businesses health. In order to get an accurate view of self-employed income lenders are now requiring additional documentation that takes 2020 into consideration.

If you are self-employed, you should get these items ready to give to your lender. On all of our preapprovals we are asking for this day one now. Saying you think your business is fine is not enough to get a preapproval.

We need these documents upfront so we can send to our self-employed income desk to calculate the businesses health. I have seen no exceptions to this so best to be prepared. Below are the new requirements.

In addition to tax returns to qualify we now need

Audited YTD P&L

reporting business revenue, expenses, and net income up to and including the most

recent month preceding the loan application date

OR

Unaudited YTD P&L

reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date

AND

Two business depository account(s) statements

no older than the latest 2 months represented on the

YTD P&L

If the borrower does not have a business depository account, then personal bank statements evidencing business deposits and expenses is required

Documentation is required to confirm which transactions are directly related to business activity when personal account statements are used to analyze business stability

*This is written 8/1/2020.