Self-employed And Commission Mortgage Lenders
Bank Statement Only Mortgage Lenders
For self-employed mortgage applicants, self-employed mortgage lenders must obtain complete individual federal income tax returns for the most recent 2 years, including all schedules. The mortgage applicants business tax returns for the most recent 2 years must also be obtained unless the following criteria are met:
• individual federal income tax returns show increasing Self-Employment Income over the past 2 years;
• funds to close are not coming from business accounts; and
• the mortgage to be insured is not a cash-out refinance.
A year-to-date Profit and Loss (P&L) statement and balance sheet must be obtained if more than a calendar quarter has elapsed since date of most recent calendar or fiscal year-end tax return was filed by the borrower. A balance sheet is not required for self-employed mortgage applicants filing Schedule C income. If income used to qualify the borrower exceeds the 2 year average of tax returns, an audited P&L or signed quarterly tax return must be obtained from the IRS.
For Commission Income less than or equal to 25 percent of the borrower’s total earnings, the self-employed mortgage lenders must use traditional or alternative employment documentation. For Commission Income greater than 25 percent of the borrower’s total earnings, the self-employed mortgage lenders must obtain signed tax returns, including all applicable schedules, for the last 2 years.
For both Self-Employment and Commission Income, in lieu of signed individual or business tax returns from the borrower, the self employed mortgage lenders may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.
