Qualifying for a USDA Mortgage When You Are Self-Employed
USDA Definition of Self Employed
Before getting into the USDA loans for the self-employed. Let us understand who under the USDA are considered as self-employed in order for them to be under the USDA loan eligibility criteria. The USDA loan program for the self-employed considers those individual self-employed who:
- Are 1099 Contractors
- Are 100% commissioned and are W2 employees
- Have converted from self employed to W2 employee
USDA Guidelines for Self-Employed Program
The minimum eligibility requirement for this program is that the person applying for the loan must be self-employed for at least the past 2 years. To support this qualification criteria the lender will require verification documents like the business and personal tax returns for the last two years as well as the articles of incorporation when they are applicable. The tax returns that are submitted must carry all schedules as well as pages and in cases where the applicant is filing for an extension it must eb made sure the signed document filed for extension must be available for underwriting. The documents of the tax returns submitted by the applicant will include the following:
- For sole proprietors Schedule C is submitted
- Corporations need t submit tax returns
- Details of partnerships – if applicable
- Signed Extensions in case necessary
- Balance Sheet – Year-to-date
- Date Profit &Loss Statement – Year-to-date
USDA Loan Income Limits for Self-Employed
The income limit is applicable in this loan program just like other USDA home loans. The income limit and the qualifying income for USDA loan for the self employed is based on the adjusted income of the applicant. The calculation of this adjusted income is done after the expenses are deducted and the eligible income us not decided upon the basis of total sales or gross commissions of the applicant.
