Explaining the 1-Year Income Mortgage Program

In a recent bulletin announcement on October 4, 2023, Fannie Mae introduced new guidelines for self-employed borrowers seeking mortgage financing. One of the key updates is the requirement that each business entity must be in existence for a minimum of 5 years in order to use a one-year tax return. This means that self-employed borrowers with multiple business sources may need to provide 2 years of business returns for one business and 1 year for another, depending on the length of time each business has been open.

Waiving 2 Years of Business Tax Returns:

We understand the challenges faced by self-employed borrowers and always strive to find innovative financing solutions. We have been quick to adapt to Fannie Mae’s updated requirements and continue to assist borrowers in meeting the criteria to waive 2 years of business tax returns. To qualify for this waiver, the following conditions must be met:

1. Personal Funds for Down Payment, Closing Costs, and Reserves:

To waive the requirement of providing 2 years of business tax returns, self-employed borrowers must ensure that the entire down payment, closing costs, and reserves come from personal funds. This demonstrates the borrower’s financial stability and reduces the reliance on business income for mortgage qualification.

2. Each Business Open for at Least 5 Years:

Another condition for waiving 2 years of business tax returns is that each business entity must have been open for a minimum of 5 years. This requirement ensures that the businesses have established a track record of stability and success, reducing the risk associated with relying on newer ventures.

3. Recent 2 Years Show Income Increase:

The most recent 2 years of business tax returns must demonstrate a consistent increase in income. This requirement showcases the borrower’s ability to generate sustainable income and indicates a positive trajectory for their businesses.

If you are self-employed for at least one year contact our office to discuss possible financing.

Connect with one of our loan consultants to learn more.