Self Employed Borrower

Self Employed Borrower

Hey, how's it going? Pete Metz here. I wanna say thank you so much for trusting us to help you guys with your home loan. If you're watching this video, that means that you are more than likely self-employed. We send this to all of our self-employed borrowers. I would ask that you watch this video in its entirety, so you can really understand the rules behind self-employment and what we are asking for and why it is we are asking for what we need.

So, first of all, if you're self-employed, then it basically means that according to Fannie Mae and Freddie Mac, their document requirement is if you are 25% owner of a company or more. If you're less than 25%, they don't consider you a self-employed borrower. So if you're 25% or more owner of a company, then technically you are self-employed, and these are what they will ask for.

25% ownership (or MORE) in company If less than 25%, you are employed
icon 2 years Less than 5 years self employed
= 2 years tax returns
icon 1 year 5 or more years self employed
= 1 year of tax returns

If you're more than five years self-employed, they will only ask for one year tax return and if you are a corporation, partnership, LLC, they're going to want to see the both. The business tax return and also the personal tax return. So both together.

If you're less than five years self-employment, they're gonna wanna see two years of the last two years of Self-employment and personal tax return. So tax return for your business, and tax return for your personal for the last two years if you've under-ed five years of being self-employed.

icon closed deal Both business AND personal tax returns REQUIRED
icon how to file tax return Tax Return
icon one person company Sole proprietorship ⇾ Only provide personal tax returns
More than 5 years in business ⇾ 1 year worth of tax returns Less than 5 years in business ⇾ 2 years worth of tax returns

Now, if you're a sole proprietor, that means that you don't have a business tax return, you just have one tax return, and all we would need is the last two years or the last one year, depending on how long you've owned your business, of your personal tax return. For all self-employed borrowers, they will want a current profit and loss statement that gets you up to the most.

Now, this profit and loss statement, they're going to look at and make sure the business is continuing to make money and are going to look at the net income, making sure the net income is equal to or more than on track to make as just as much as you made last year or more.

icon money bag Profit & Loss (P&L) statement that is current up until 30 days prior to close of escrow
icon income statement Profit & Loss Statement (P&L)
icon-this-year Income Comparison
icon brainchart Explain WHY business' profits are lower

If it's under, then we have to explain why the business has not made is not on track to make just as much as the income from last year. Also, in addition to the P&L, we're gonna ask for the last three months of the business bank statements.

Now, some businesses are very different than others. Some businesses, most of the income comes in later in the year, or it could be very seasonal and there could be in the last three months has had its. I've seen it, to where the business bank statements don't actually show a profit, because maybe you had a bunch of expenses that came through in the business. That's okay.

icon month 3 Last 3 months of Business Bank Statements
icon cash flow analysis Cash Flow Analysis

Now, the business bank statements, what they do is, they look at all the deposits and then they look at all the expenses coming out of the business and they do what's called a cash flow analysis, to make sure that there's money left over, to make sure that this business is making enough money to pay its expenses and there's profit left over for the last three months.

icon important

The biggest thing to understand is that the three-month bank statements and the profit and loss will be very important for us to review for your pre-approval, making sure that you guys have a really good experience working and getting your guys' home loan.

If you guys have any questions regarding self-employment or any documentation that I just requested, feel free to give me a call or send me a text. Me or one of my team members will be happy to help you out. I hope you guys are doing great, and we look forward to serving you guys at a very high level. Thank you so much. See you.

icon month 3 Last 3 months of Business Bank Statements
icon cash flow analysis Cash Flow Analysis

***The transcription is auto-generated by a program and may not be accurate. In order to ensure you get all the information from the video properly, you must watch the video.

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