On October 4th Fannie Mae released a bulletin making changes and clarifying rules around SELF-EMPLOYED. They are required to be implemented by Jan 1, 2024, but encourage lenders to implement immediately.

Fannie Mae is now following Freddie Mac’s lead on businesses that have been in existence for 5 or more years. Fannie now allows providing only one year’s tax returns if the business has been in existence for 5 years regardless of AUS requiring two years returns.

The caveat is that the borrower must have had 25% or greater ownership in the business during the entire past five years. In other words, just because the business has been in existence for five years that does not mean the borrower has owned it that entire time.

Another BIG item is Fannie Mae unlike Freddie Mac will sometimes require only one year tax return and if so then the borrower only had to have one year of self-employed history.

Fannie has updated and clarified their guidelines. IF a borrower has one full calendar year of filed self-employed tax returns, then you may be able to use that income. Do not confuse this with being self-employed for over a year. We are at the end of October 2023. For someone to use this rule they would have to be self-employed as of Jan 1,2022 to today with a fully filed 2022 tax return.

n addition, to allowing for one year’s tax return or less than a two-year self-employment history you must have the following:

• Income prior to S/E business must show at or greater level of earnings.
• New business must be in a field that had the same products or services as the current business OR an occupation that had similar responsibilities as the current business.

The guides also state they will want to see two years of employment history prior to the current self-employed business.