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

June 28th, 2019 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!Tampa FL USDA Approved Lender List

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.

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

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

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On a positive note, since I started “Metroplex” way back in 2001, we have been able to assist a tremendous amount of self-employed clients and even offer a courtesy tax return analysis for those who prefer to review their self-employment income as the beginning step.

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, “An applicant or household member is considered self-employed when they have a 25 percent or greater ownership interest in a business.”

Additionally, the following will need to be reviewed when applicable:

  • Two consecutive years of signed personal Federal Income Tax Returns with all schedules filed with the IRS; and
  • Two consecutive years of signed business Federal Income Tax returns with all schedules filed with the IRS; and
  • A current year-to-date profit and loss statement which is not required to be audited; and
  • Confirmation the business is operational must be obtained within 30 days of the loan closing.

Also, remember that if you have filed a tax extension or have entered into an IRS installment agreement, prepare to have those forms ready as well.

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

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  • Corporations;
  • Partnerships;
  • Sole Proprietors; and
  • 1099 Independent contractors.

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
SeanS@MPLX.org

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

P.S. – You can download our “USDA Blueprint for Success” by CLICKING HERE.

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