Hi everyone, 

I am an agent and would like to buy my first home, (the irony, I know) I've done quite well my first year in the business, however I want to know if it is possible to qualify after only 1 year of tax returns? Again I'm commission only, but I recently heard that FreddieMac/AnnieMac changed their lending guidelines for self-employed and that 1 year could also be sufficient. 

If this is true, any reccomendations lenders? 

Please advise!

1 year tax return, but I think you have to show the business is 5 years old. @Chris Mason might chime in.

question is for mortgage lender... but there are loans for one year tax returns great credit and some cash in bank

@Roxanne Lembke As @Russell Brazil mentioned, you can use 1 yr of tax return, but you have to show that the business has been in existence for 5+ yrs. You saying it will not suffice. You will have to provide personal and/or business tax returns as proof.

You can buy with just 1 yr of tax return using a portfolio loan, and then once you have established 2 yrs of income, you can refi into a conventional loan.

Ok, so the company/brokerage I work for has been in business that long, but as a Realtor I have only been in the business 1 year. It sounds like I would still need 2 year of tax returns?

Originally posted by @Roxanne Lembke :

Ok, so the company/brokerage I work for has been in business that long, but as a Realtor I have only been in the business 1 year. It sounds like I would still need 2 year of tax returns?

 Correct. Being that you are independent/self-employed, you need to be in business for 2 yrs (2 tax returns). This is for conventional loans.

@Upen Patel  

I have a portfolio loan that is collateral on 18 properties.  I have more than 2 years of tax return, good credit scores, meet income debt ratio.  Will I still be qualify for a conventional loan?  One portfolio loan collateral on 18 properties. 

Thank you

Originally posted by @Mary L.:

@Upen Patel 

I have a portfolio loan that is collateral on 18 properties.  I have more than 2 years of tax return, good credit scores, meet income debt ratio.  Will I still be qualify for a conventional loan?  One portfolio loan collateral on 18 properties. 

Thank you

Mary, that depends on how the loan is setup and if you are "personally obligated" on the debt. The # of financed properties count against you if you are personally obligated. But if the loan is in the name of an LLC/S-corp/C-corp/etc, then it would not count against you.

*** Moderator - Not soliciting. Just providing input to a specific question. ***

For Fannie Mae, regardless if the loan is in the name of the LLC, if you own 25% or more of the LLC, it counts in Fannie Mae's 10 financed property rule.

Type of Property Ownership to include in Financed Property Count:

 Joint ownership of residential real estate. (This is considered to be the same as total ownership of an individual property).

Note: Other properties owned or financed jointly by the borrower and co-borrower are only counted once.

 Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner of the corporation; however, the financing is in the name of the borrower.

 Obligation on a mortgage debt for a residential property (regardless of whether or not the borrower is an owner of the property).

 Ownership of property that is held in the name of a limited liability company (LLC) or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of 25% or more, regardless of the entity (or borrower) that is the obligor on the mortgage.

 Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined

ownership in the LLC or partnership of less than 25% and the financing is in the name of the borrower.

 Ownership of a manufactured home and the land on which it is situated that is titled as real property

Type of Property Ownership NOT to include in Financed Property Count:

 Ownership of commercial real estate.

 Ownership of a multifamily property consisting of more than four dwelling units.

 Joint or total ownership of a property that is held in the name of a corporation or S-corporation, even if the borrower is the owner of the corporation and the financing is in the name of the corporation or S-corporation.

 Ownership in a timeshare.

 Ownership of a vacant (residential) lot.

 Ownership of a property that is held in the name of an LLC or partnership where the borrower(s) have an individual or combined ownership in the LLC or partnership of less than 25% and the financing is in the name of the LLC or partnership.

 Ownership of a manufactured home on a leasehold estate not titled as real property (chattel lien on the home).

Being self employed, if you were to find a lender that doesn't have any overlays on an FHA loan, it is possible to count the income provided you had previous experience in that same or related field of two years or more.

Originally posted by @Roxanne Lembke :

Hi everyone, 

I am an agent and would like to buy my first home, (the irony, I know) I've done quite well my first year in the business, however I want to know if it is possible to qualify after only 1 year of tax returns? Again I'm commission only, but I recently heard that FreddieMac/AnnieMac changed their lending guidelines for self-employed and that 1 year could also be sufficient. 

If this is true, any reccomendations lenders? 

Please advise!

HI Roxanne,

It is true you need to be in the business for 2 years but no one talks about the details about how that is documented which is either by:

- Looking up CA BRE website consumer licensee information which will show how long you've been licensed

- CPA letter to sign/date on you being self employed for 2 + years or 5+ years if you're using Freddie Mac's program since Freddie specifically wants 5+ years to use 1 year tax return

- or another third party to verify you've been SE (self employed) like business licenses, attorney's, other auditor or licenses

With regards to income like others have mentioned you can use 1 year tax return to base your monthly qualifying income off of.

Freddie mac, like mentioned above is a a conventional financing option but the downside with Freddie is they want 5 years in the business as documented with one of the options above. Recently, which no one has mentioned yet, and this has only been in the last 2-3 months Fannie Mae whom used to always require 2 years tax returns is now doing 1 year tax returns too depending on the findings we get when your file is ran through their automated UW system. So what this means is that not every self employed person who is ran through AUS (automated underwriting system) comes back with 1 year SE tax return findings. However, lately most of my findings have been one year. 

The main highlight or benefit of Fannie mae's 1 year tax finding is that you dont need to prove 5 years in the same line of work which is a harder burden of proof for most realtors or business people. 

I think the statistic is that 90% of smaller businesses go out of business or something before the end of the 5th year or something. This might have something to do with Freddie requiring their new 5 year rule to reduce their exposure. Its a good thing Fannie came to the rescue with a more lenient 1 year tax return option that is also considered conventional financing.

Hope that helps piece together what was mentioned above. This is where the theory meets what the underwriters really want to see.

@Mary L.  One other important point to keep in mind - if you're buying a new primary residence (a home where you will live), there is no limit on the number of financed properties for conventional loans.  (Not all lenders allow this because of overlays, but many do.)

Originally posted by @Mary L.:

@Upen Patel  

I have a portfolio loan that is collateral on 18 properties.  I have more than 2 years of tax return, good credit scores, meet income debt ratio.  Will I still be qualify for a conventional loan?  One portfolio loan collateral on 18 properties. 

Thank you

Hi Mary this is a different topic thread but Fannie used to count all properties in entities as "financed properties," as long as you owned more than 25% in that entity as documented by your annual K1 form which your LP/LLC/Scorp/flow through entity will show your ownership percentage.

This meant that even if the mortgage note was in the LLC's name and the title was in the LLC's name you'd still be hit with these properties as financed properties as long as you owned more than 25% of the company/entity.

Fannie has evolved their language on how they count financed properties in late 2017.

Now their emphasis is on you being "personally obligated," on the note or basically if you're personally obligated on the note/mortgage/paper instrument.

A real life experience or example is that most local credit unions or community banks that use the same loan origination software will make you sign make you sign the mortgage note as a manager of your LLC however the personal guarantee (PG) is a separate document. So if the underwriter on your file for a coventional loan were to see that PG document then they will count all 18 of your properties as "financed properties," since it proves you're personally obligated.

If the PG document were not in the file then you only have 1 financed property (assuming your primary residence is financed and you have no other properties in your name or personally obligated on).

If the commercial lender integrates the mortgage or promissory note with the PG or personal guarantee it will most likely be flagged so having them separated can prove to be advantageous atleast from a fannie mae conventional financing stand point.

@Upen, @Kevin, @Stephanie, @Albert, thanks a lot for all your details information!

All my properties are under my LLC, but I’m the PG on it. So I guess they will count all 18 properties.

Thanks again!