Self-employed Qualifying Income Options

Self-employed borrowers are eligible for either personal bank statement documentation or business bank statement documentation to verify consistent, qualifying income. The following requirements apply to both documentation types:

  • Borrowers must be self-employed for at least 2 years and business must be in existence for at least 2 years.
  • Non-permanent Resident Aliens and Foreign Nationals are ineligible.
  • All parties listed on each bank account must be included as borrowers on the loan.
  • Up to 3 NSF checks and overdraft protection transfers in the most recent 12-month period are allowed with explanation from the borrower.

PERSONAL BANK STATEMENT PROGRAM

  • 24 months or 12 months complete bank statements
  • 100% of deposits, averaged over 24 months or 12.
  • Transfers between personal accounts should be excluded
  • Transfers from a business account into a personal account are acceptable
  • Unusual deposits must be documented
  • Borrowers will qualify off the lower of the following:
    • Income figure listed on Signed 1003
    • Personal Bank Statement Average (total deposits [minus any disallowed deposits] 24 months or 12 months)

BUSINESS BANK STATEMENT PROGRAM

  • 24 or 12 months complete business bank statements
  • One of the following is needed:
    • Borrower prepared P&L covering same time period as the bank statements.
    • Expense statement prepared by CPA or licensed tax preparer
  • Business bank accounts, personal bank accounts addressed to a DBA, or personal accounts with evidence of business expenses can be used for qualification.
  • Wire transfers and transfers from other accounts must be documented or excluded.
  • Borrower must be minimum 50% owner of business.
  • Business expenses must be reasonable for the type of business (examples of business with higher expense ratios may include construction companies, builders, restaurants and retail firms).
  • Statements should show a trend of ending balances that are stable or increasing over time.

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