Changes for Self-Employed Borrowers as of December 2020

January 6, 2021
3
Three months of business bank statements now required.

 

Starting last month, it became a little more difficult for self-employed borrowers to secure a Fannie Mae-backed residential loan. In December, the GSE started requiring self-employed loan applicants to provide their most recent three months of business bank statements, which will be needed to back up submitted profit and loss statements. Fannie Mae previously required just two months' worth of statements. And some predict that Fannie and other lenders' tightening credit requirements could further frustrate self-employed home owning hopefuls. The vulnerability of small businesses in the time of the COVID-19 health crisis has industry pundits pondering the implications of increasing borrowing restrictions on the self-employed. Jeff Lazerson, a broker writing for mortgagegrader.com—and a contributor to The Sun—writes in his column that "tying three recent bank statements to the entire year-to-date P & L can easily become a nightmare for borrowers and underwriters." "If you own 25% or more of any business entity, corporation, LLC and the like, you are self-employed, even if you are a W-2 employee of your corporation," Lazerson explained. "Or if you have Schedule C income on your 1040 tax returns (independent contractors, for example), you also are self-employed."

Source: MReport