Doing Business as a Business Owner: Qualifying For a Mortgage With Less Than 25% Ownership

The best mortgage brokers know that it is impossible to use a one-size-fits-all approach with their clients. This is especially true when their clients are business owners. For entrepreneurs who are seeking a mortgage, special situations abound. These unique circumstances can pose a challenge, but at MortgageDepot, we believe that there is always a path to your real estate goals.

What if you are a business professional who owns less than 25% of your company? How do you prove to a lender that you have enough financial stability to obtain a mortgage?

Fannie Mae outlines specific requirements for business owners who fall into this category. Here are the highlights:

• Borrowers who own less than 25% of a company can use their Schedule K1 form to prove that their business has enough liquidity to support the mortgage.
• If the borrower’s Schedule K1 form does not show a 2-year history of receiving appropriate cash distributions, they must prove business liquidity in another way.
• If the borrower needs additional documentation to prove liquidity, they can use the Schedule L portion of their business tax return, two months of recent bank statements or other forms of documentation suggested by the lender.
• In a partnership situation, the borrower can use “guaranteed payments to the partner” received as cash flow to qualify for a mortgage. These payments must have a two-year history.
• The borrower must have two years of individual federal tax returns to qualify for a Fannie Mae mortgage. If they can provide all documentation listed here, they do not need business tax returns.

At MortgageDepot, we understand that securing a mortgage is a mind-boggling endeavor! If you are a business owner, trust us to find a loan with terms that make sense. Contact us today to learn more about our complete selection of mortgage products!

Connect with one of our loan consultants to learn more.