Self-Employed Income Hacks
What You Need to Know
Did you know that FNMA does not make you consider self- employment losses if income from another source is available?
Self-employed borrower’s losses reported on the borrower’s tax returns, is not required when a borrower can qualify using only income that is from separate non self-employed source. Examples of non-self-employed income from another source include salary from another job, passive income and retirement income. So, if your business shows a loss, you may not have to count the loss if you have other income. Lenders require two years of signed business and personal tax returns to calculate an average income but under certain conditions the business tax returns can be waived if: -the borrower uses personal funds for down payment, closing costs and reserves, -they’ve been self-employed in the same business for at least five years, and -the borrower’s individual tax returns show an increase in self-employment income over the past two years. Another alternative for a lender allows a self-employed borrower to qualify using the most recent year of personal and business tax returns, instead of analyzing the past 2 years of tax returns. These rules can offer big advantages to a borrower when the business had lower income in the prior year. Or if the self-employed business loss can negatively affect available income for qualification purposes.