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mharless1 · Joined: 14 Oct 2009 Posts: 1 1.43 Dollars($)

My husband and I currently have a mortgage on a home in which we have been consistent with payments for the past 5 years. I am a stay-at-home mom. My husband, an occupational therapist who has been employed by the same company for the past 6 years, is going to open up his own OT practice 3 1/2 hours away. We are selling our current house and will be able to put down at least 10% on a new home. Both of our credit scores are good. Will we qualify for a home loan or will we have to wait until we can prove income with the new business? If we have to wait, how long will it take before we can qualify? Thank you so much!

gmakerley · Posted: Wed Oct 14, 2009 12:49 pm Post subject:

i'm afraid it takes 2 years to put together the income documents, etc. for a self employed person. what that will mean is you'd have to compile your 2009 and 2010 tax returns along with a profit and loss statement for the end of the month that is the 2-year anniversary. that two years' earnings will be averaged out and used for qualifying.

that's not what you want to hear, i am sure, but (especially in this current market) lenders are quite selective and conservative. you could, as an alternative, find someone in your family to be a non-owner occupant coborrower and possibly sneak in with an fha loan that way. it's worth considering, especially given that you've been homeowners as long as you have already.

jveenstra · Posted: Wed Oct 14, 2009 12:52 pm Post subject: Self Employed

Mortgage qualification for self employed requires the averaging of the last 2 years self employed net income.

So, must be self employed for 24 months or longer and the average net income needs to be high enough to qualify for whatever mortgage you want.

Sometimes it is possible to get a mortgage with 12+ months self employed net income if one is self employed in the same line of work. The self employed income should be equal to or greater than income before self employment to demonstrate self employment has not hurt the income. The higher the credit scores and the larger the down payment and the more reserves help a lender make a favorable answer if self employment is over one year but under two years.

The two years is for two reasons:
1. To show the income
2. To show that one has the business wherewithall to run one's own business.

gmakerley · Posted: Wed Oct 14, 2009 12:57 pm Post subject:

good point, john. i haven't seen it lately, but in the past automated underwriting (du) on conventional loans allowed for 1 year. i don't know if this still occurs.

eric1 · Posted: Wed Oct 14, 2009 4:39 pm Post subject:

I think you can use one year's tax returns if you also provide a YTD cash flow statement provided by your accountant for the current year.

gmakerley · Posted: Wed Oct 14, 2009 5:04 pm Post subject:

i think that's gonna depend on the underwriter, eric. i know i have a deal in the works with a s/e borrower whose 2 year history was through 7/31/09 and she insisted on a full 2 year record of income, with a P&L done for the end-period.

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