It’s getting more difficult for the self-employed borrower to qualify

Written By: Glenn Michaels

My younger daughter and her husband are self – employed and it is more difficult for self – employed borrowers to qualify than ever before.

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The Qualified Mortgage (QM) that became official in January 2014 has pretty much eliminated the “stated income/stated asset (SI/SA) mortgage program and the No Income Check (NI) mortgage programs. As a mortgage underwriter I have been telling my daughter and her husband that they will need to show more income to qualify for a mortgage loan when they are ready to buy their first home. Her and her husband make a good living but cannot provide evidence of such a good living.

Self – employed borrowers up until the QM became the law of the land, usually applied for a SI/SA mortgage or a NI mortgage and they usually received a mortgage commitment for such a mortgage were able to meet the terms of the commitment since there were minimum income standards which were often substituted by an asset profile requirement and credit profile.

Usually the asset profile along with the credit profile easily substituted for the income profile, not any longer. Now my daughter and her husband must provide proof that they can truly afford to repay the mortgage for the home that they wish to purchase.

Fortunately my daughter explained to her accountant that she needed to show more income over the last several years or they will not qualify for a home mortgage when they apply for a mortgage. She also paid more income taxes over the last few years to demonstrate additional income earned.

My daughter’s earned income has steadily increased over the last five (5) years and so did her husband’s self – employment income resulting in more income taxes paid to the Internal Revenue Service and to the State Tax Commission. By doing this gradually over a five (5) year period the tax shock to the Internal Revenue Service and to the state tax commission was gradually paid out over a five (5) year period. The mortgage loan application revealed an increase in annual income over a five (5) year period so no underwriter would have an issue there. Now hopefully the income shown will be adequate for the home being purchased.

Fortunately, my daughter and her husband were able to demonstrate adequate self – employment income spread out over a five (5) year period and the home that they decided to purchase was not out of their league.

Self – employed borrowers that were not advised to do what my daughter and her husband did now when applying for a mortgage loan are getting hammered. Many cannot qualify for a mortgage especially with averaging the income. In addition, many self – employed borrowers have to scale down their purchase requirements.

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Very often when the government makes a change or a sweeping change some people are impacted greatly by the change(s).


About The Author

Glenn Michaels - As an NAMP® staff writer, Glenn Michaels is a mortgage underwriting instructor for Mortgage Underwriter University ( As a BBA & FHA DE Underwriter, Glenn is a Pace University graduate who also graduated from New York University’s School of Mortgage Finance. Glenn has conducted numerous training classes and has worked in the mortgage banking industry for 38 years. If you're interested in becoming a writer for NAMP®, please email us at:


Opinion-Editorial (Op-Ed) Disclaimer For NAMP® Library Articles: The views and opinions expressed in the NAMP® Library articles are those of the authors and do not necessarily reflect any official NAMP® policy or position. Examples of analysis performed within this article are only examples. They should not be utilized in real-world application as they are based only on very limited and dated open source information. Assumptions made within the analysis are not reflective of the position of NAMP®. Nothing contained in this article should be considered legal advice.