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In most instances, the Borrower should have at least a two-year history of primary employment documented on Form 65, Uniform Residential Loan Application and verified in accordance with Topic 5300.
This week, Fannie Mae and Freddie Mac, government agencies that buy Conforming Loans, announced that it will not require Profit and Loss (P&L) statements and business bank statements anymore for most self-employed borrowers.
This worksheet may be used to prepare a written evaluation of the analysis of income related to self-employment. The purpose of this written analysis is to determine the amount of stable and continuous income that will be available to the borrower for loan qualifying purposes.
Fannie Mae does not require the lender to submit the Form 4506-C to the IRS to obtain a borrower's income tax information during the loan origination process, although many lenders choose to do so, which Fannie Mae views as a best practice.
How Does Freddie Mac Asset Depletion Work? The new rule per Freddie Mac Asset Depletion: A borrower may use 70% of the balance of an investment account and divide that number by 240 months. The end result may be used as a qualifying monthly income.

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This week, Fannie Mae and Freddie Mac, government agencies that buy Conforming Loans, announced that it will not require Profit and Loss (P&L) statements and business bank statements anymore for most self-employed borrowers.
Line 22 \u2013 Amortization/Casualty Loss: Amortization expenses are usually one- time costs that are distributed over a period of time and can therefore be added to Total Income. Casualty losses are typically nonrecurring, add them to Total Income.
The lender must obtain copies of the borrower's signed federal income tax returns filed with the IRS for the past one or two years (depending on the income type) for the following sources of income or employment.
Evaluating debt ratios When the Borrower's monthly debt payment to income ratio exceeds 45%, the loan is ineligible for sale to Freddie Mac. As a guideline, the monthly debt payment-to-income ratio should not be greater than 33% to 36% of the Borrower's stable monthly income.
In most instances, the Borrower should have at least a two-year history of primary employment documented on Form 65, Uniform Residential Loan Application and verified in accordance with Topic 5300.

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