As always, self employed mortgage applicants have to provide proof of their employment in order to obtain a mortgage. This is done by a letter from the person’s CPA, a copy of a license or certificate of incorporation. Additional information may be needed per each lender. Under the new rules for mortgages, most applicants now must also provide proof of income as well. This proof can only be offered as tax returns. Most lenders will require the applicants last two years personal Federal tax returns to be included in the package. Business tax returns might also be requested, depending on the lender and the job type.

At what point will the lenders no longer accept 2007-8 returns and will want 2009 returns? They cannot ask for them until after April 15^th and even so might allow more time, with the proper extensions. However, after the first quarter of 2010, the lenders will require self employed applicants to provide verification of current cash flow via quarterly tax filings since the last filed return or an audited P&L. This means that in come the end of March, documentation of the first quarter P&L will be needed and the lenders will probably allow June quarterly P&L. However, procrastinators forget about offering the third quarter in lieu of 2009 returns- even with a great excuse. The banks will then want the 2009 returns in addition to the last quarterly P&L. The point is, get your paperwork together early in the year if you plan on getting a mortgage in 2010.

Please note, the lenders will compare the current cash flow against the prior year’s returns to determine stability and continuance of income; so make sure they are clear, concise and look stable.

Dale Robyn Siegel