Fannie Makes Major SelfEmployed Income Calculation Effective Feb 1

Fannie Makes Major SelfEmployed Income Calculation Effective Feb 1

Fannie Makes Major Self-Employed Income Calculation Effective Feb 1

OK this is one that would be easy to glaze over but it is MAJOR and a need to know!

 

Fannie's new Self-Employed Income Calculation goes into effect with originations of 2/1/2016.   They originally were going to roll it out on 4/1/2015 but then delayed it at the last minute until Feb 1, 2016.    With these changes, when using K-1 Income (for a self-employed borrower that reports with a 1065-Partnership or a 1120 (Corporation), a lender is required to obtain the most two years using business income to qualify. That in itself is not a major change.   However, lenders may only now use Business Income when there is a history of income distribution to the borrower that is consistent with the level being used to qualify.

 

While the above sentence seems fairly "boring", it is actually a huge move (and typically not for the good).    In the past, lenders would take the Gross Income, Subtract the Expenses, Add back in Depreciation and/or Amortization write offs and that should line up to the K1 amount on line 1.    Lenders must now calculate effective income for Self- Employed Borrowers in a totally different way in requiring that lender look at income distribution, adequate liquidity and sales/earning trends in the equation of income.  In many cases, this will reduce the effective income that can be used by 25-100%. 

  

It is vital, imperative and urgent that all Tax Returns be reviewed by an experienced loan originator (like myself) upfront.  Do NOT allow inexperienced loan officers to practice on your clients.    You will have loans blow up with this new guideline.   Let us know how we can help NOW verses later.

Thanks Linda Davidson, Service First Mortgage 972-278-3400 


 The Burtonteam specializes with new home buyers and move up buyers & sellers located in the following areas; Frisco, Plano, Prosper, McKinney, The Colony, Little Elm, Carrollton, Lewisville and surrounding areas. Jerry & Janna Burton puts to use advanced internet marketing for maximum exposure of your home for maximum exposure. For Buyers, we set everyone up to receive new listings once listed that match their search criteria for quick response.  For help with buying or selling a property 972-625-0852.


Jerry and Janna Burton Headshot
Author:
Phone: 214-850-9014
Dated: January 27th 2016
Views: 125
About Jerry and Janna: Jerry and Janna Burton joined William Davis Realty in February, 2009. Both Janna and Jerry hold busi...

Property Search









RSS Feed

View our latest blog posts in your RSS reader. Click here to access. RSS

Search Blog

Recent Blogs

Aug 6 2020 60014 1 - NEED DOWN PAYMENT ASSISTANCE?;
Jun 29 2020 60014 1 - FIRST TIME HOMEBUYERS?  Are
Apr 1 2020 60014 1 - ATTENTION POTENTIAL HOME BUYERS!
GENERAL FINANCING QUESTIONS Everything You Need To Know About Getting A Home Loan - GENERAL FINANCING QUESTIONS 

Saved Properties

This is a list of your favorite properties. We will email you if a property is reduced or leaves the market.

Click 'Save' to add a property to this list.

Register / Login

New & returning visitors please enter your information to login.

By clicking 'register' you are agreeing to our terms of use & giving us expressed written consent to contact you.

Questions? Comments? Complaints?

This message will go directly to the head of our team.

Location & Address

WILLIAM DAVIS REALTY
17732 Preston Road
Dallas, TX
214-935-2209
214-393-4733