Self-employed to face mortgage challenges under new rules

The tighter U.S. lending standards effective this month could make it harder for self-employed borrowers to get a mortgage.

Borrowers are likely to find their income placed under a microscope, the New York Times reported. In the past, two years’ worth of tax returns sufficed, but none of the documentation that many self-employed borrowers used to rely on to obtain a mortgage are acceptable any longer, the Times noted. But under the new rules, lenders must confirm that the borrower has a debt-to-income ratio that does not exceed 43 percent. For the self-employed, this means they will have to submit a profit-and-loss statement and a balance sheet.

Peter Grabel, a Connecticut loan originator, said would-be borrowers should have an underwriter review their financial data first.

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“They’re really trying to dig deeper,” Grabel said of banks.

Still, Wells Fargo and other big banks have said they will offer loans that don’t meet the definition of a qualified mortgage, which might help some potential borrowers past muster. [NYT]Mark Maurer