COVID-19 effects are affecting mortgage lending. Fannie Mae and Freddie Mac have released new requirements to participating lenders making loan decisions. The lenders are now required to determine if the borrower’s income is stable and has a reasonable expectation of continuance.
They are now requiring the following documentation from self-employed individuals applying for a mortgage:
- An audited year-to-date profit and loss statement reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application date:
- An unaudited year-to-date profit and loss statement signed by the borrower reporting business revenue, expenses and net income up to and including the most recent month preceding the loan application date, and two business depository account(s) statements no older than the latest two months represented on the year-to-date profit and loss statement.
Many lenders are requiring both sets of documents. It is important for you to know the rules and know that audited financials are not necessary if you provide the documents listed in #2.