Since Covid-19 happened, the mortgage industry has gone through some changes. Some are great (really low interest rates!), others are more frustrating! One recent change affects anyone using FHA financing if they are self employed. These are temporary guidelines until at least November 30, 2020. FHA wants to ensure that borrowers are able to make their mortgage payments. So if you are self employed, this is how it will affect you.
Verifying your income will be a bit more difficult. In the past we just needed 2 years of tax returns and possibly a profit and loss statement, along with proof the company is still in existence. Now we need to show one or more of the following to document income:
- Evidence of current work, like executed contracts or signed invoices that indicate the business is operating on the day the lender verifies self-employment
- Evidence of current business receipts within 10 days of the note date (payment for services performed). The note is created near the end of the loan process
- Lender certification that the business is open and operating. The lender will confirm through a phone call or other means
- Business website with activity showing current business operations, for instance, if timely appointments for estimates or services can be scheduled
Lenders may vary on what they require – some may only want one of these items, others may want more. So why is it more difficult to get a mortgage with covid-19? Research is showing that a higher percentage of self employed home owners are seeking forbearance and so this is a concern to FHA.
Hopefully this will be short lived but it’s up to FHA. For many, this will just mean more documentation for their file and it will not affect their ability to get a mortgage.
Leslie Vanderwerf, NMLS ID#335509, Cross Country Mortgage LLC, An Equal Housing Lender, NMLS#3029 – Email – Website
