How to Qualify and Apply for A FHA Home Mortgage in California?

When it comes to being self employed and applying for a California FHA home mortgage loan there are many things you will need to know. Being self employed has many perks but there may be some hoops you have to jump through to qualify for larger loans such as home loans. If you are looking for assistance when applying for an FHA home loan in California call ABLEnding today at 866.260.2253. We have mortgage professionals that have been through the process before and they can help you better understand your options moving forward.

The literature below is taken directly from the FHA handbook:

For self-employed borrowers, the lender must obtain complete individual federal income tax returns for the most recent 2 years, including all schedules.

The borrower’s business tax returns for the most recent 2 years must also be obtained unless the following criteria are met:

individual federal income tax returns show increasing self-employment Income over the past 2 years;
funds to close are not coming from business accounts; and
the mortgage to be insured is not a cash-out refinance.

A year-to-date Profit and Loss (P&L) statement and balance sheet must be obtained if more than a calendar quarter has elapsed since date of most recent calendar or fiscal year-end tax return was filed by the borrower. A balance sheet is not required for self-employed borrowers filing Schedule C income.

If income used to qualify the borrower exceeds the 2 year average of tax returns, an audited P&L or signed quarterly tax return must be obtained from the IRS.

For commission income less than or equal to 25 percent of the borrower’s total earnings, the lender must use traditional or alternative employment documentation.

For commission income greater than 25 percent of the borrower’s total earnings, the lender must obtain signed tax returns, including all applicable schedules, for the last two years.

For both self-employment and commission income, in lieu of signed individual or business tax returns from the borrower, the lender may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS.

For additional information see Handbook 4000.1 II.A.4.c.ix.-x.; II.A.5.b.ix.-x. available at
http://portal.hud.gov/hudportal/HUD?src=/program_offices/administration/hudclips/handbooks/hsgh

If you have any further questions about applying for a home loan in California while being self employed do not hesitate to contact us at any time. We would love to help you to understand how you can qualify with the proper tax documentation.