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How do you qualify for a USDA Loan with Self-Employment income?

October 13th, 2017 by Sean Stephens

How do you qualify for a USDA Loan when you are self-employed?

With terms like 1040, 1120s, Schedule C, and Schedule E, it is easy to see how someone can be overwhelmed with the details!

However, the good news is that many self employed individuals are able to qualify for a USDA loan and in today’s video I will help break down the details on how to qualify for a USDA Rural Home Loan when you are self-employed.

And, if you have not yet done so don’t forget to download our newest educational flyer with the link below. This free guide is designed to help walk you through the mortgage qualifying process step-by-step and is ideal for both homebuyers and Realtors alike.

To learn “what NOT to do when trying to qualify for a loan”, you can download the flyer here.

How do you qualify for a USDA Loan with Self-Employment income?

Unfortunately, I hear the complaints time and time again that many banks and lenders simply do not process or handle self-employed homebuyers in an efficient manner, and the reason may be due to a lack of experience or unfamiliarity with understanding tax returns, the related schedules, and how to analyze them.

On a positive note, since I started “Metroplex” way back in 2001, we have been able to assist a vast amount of self-employed clients and even offer a courtesy tax return analysis for those who prefer to review their self-employed income prior to proceeding any further in the process.Tampa FL USDA Approved Lender

With so much mystery surrounding how to qualify for a USDA loan when you are self employed, let me break down the basics to help us get started.

First off, remember that qualifying income is based on what is claimed, not gross commissions or sales!

Further, USDA Guidelines state: “Generally, income from self-employment is considered stable and dependable if the applicant has been self-employed for two or more years, supported by documented income tax returns. Projected or hypothetical income from any source is typically not acceptable for repayment purposes.

An applicant with a 25 percent or greater ownership interest in a business is considered self-employed for the purpose of calculating repayment income. The business may be a sole proprietorship, a partnership (limited or general) or a corporation.

Here are examples of some situations which would require review under USDA self employment qualifying guidelines:

  • S-Corporation or Corporation ownership as listed above
  • Partnerships
  • Sole Proprietor and 1099 independent contractor
  • Commission based W2 employees

In the case of an S-Corporation or Corporation, additional verifications may be required to confirm Tampa FL USDA Approved Lenderthat the applicant has a legal right to the income.

Additionally, be prepared with the following:

  • Corporate tax returns
  • Schedule C (Sole Proprietor)
  • Partnership documents
  • Schedule K1
  • Signed extension (if applicable)
  • Signed and Dated Year-to-Date Profit & Loss
  • Signed and Dated Year-to-Date Balance Sheet

We understand that the USDA qualifying process can be confusing, but don’t let the details overwhelm you, because that is where we come in.

As a USDA approved lender, Metroplex Mortgage Services has expertise with this unique program, and are able to walk both homebuyers and Realtors through the process step by step.

Simply call or email to discuss your scenario, start a new pre-qualification, or if you want to take advantage of our free 2nd opinion service for a transaction that is already in progress.

(800)806-9836 X280

Let’s make it a great day, and I look forward to seeing you right here for the next tip of the week!

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