Are you a self employed business owner and wondering how Fannie Mae is going to look at your income for refinancing or purchasing a new home in this current environment? In this video, we go over the latest lender released by Fannie Mae yesterday to discuss how they are going to calculate self employed income and I also touch on how Fannie is going to look at refinancing or purchasing after filing for mortgage forbearance.
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Requirements for borrowers using self employment income to qualify during COVID-19 – https://singlefamily.fanniemae.com/media/22316/display
Income Analysis for calculating Self Employed Income
Self-employment income is variable in nature and generally subject to changing market and economic conditions. Whether a business is impacted by an adverse event, such as COVID-19, and the extent to which business earnings are impacted can depend on the nature of the business or the demand for products or services offered by the business. Income from a business that has been negatively impacted by changing conditions is not necessarily ineligible for use in qualifying the borrower. However, the lender is required to determine if the borrower’s income is stable and has a reasonable expectation of continuance. Due to the pandemic’s continuing impact on businesses throughout the country, lenders are now required to obtain the following additional documentation to support the decision that the self-employment income meets our requirements:
1) an audited year-to-date profit and loss statement reporting business revenue, expenses, and net income up to and including the most recent month preceding the loan application date; or
2)an unaudited year-to-date profit and loss statement signed by the borrower 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 two months represented on the year-to-date profit and loss statement.
a) For example, the business depository account statements can be no older than Apr. and May for a year-to-date profit and loss statement dated through May 31, 2020.
b)The lender must review the two most recent depository account statements to support and/or not conflict with the information presented in the current year-to-date profit and loss statement. Otherwise, the lender must obtain additional statements or other documentation to support the information from the current year-to-date profit and loss statement.
NOTE: The year-to-date profit and loss statement must be no older than 60 days old as of the note date consistent with current Age of Documentation requirements below.
Lenders must review the profit and loss statement, and business depository accounts if required, and other relevant factors to
determine the extent to which a business has been impacted by COVID-19. The lender can use the following guidance when performing the assessment of business operations and stability and must complete the business income assessment based on the minimum additional documentation above.
If you have additional questions about the lender letter from Fannie Mae regarding the change in self employed income guidelines, mortgage forbearance or just real estate related questions, please comment below or contact me directly.
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