New federal regulations requiring lenders to verify an applicant’s ability to repay may make it more difficult for borrowers who are self-employed to obtain a mortgage. The rules, created by the Consumer Financial Protection Bureau, set standards for mortgages that are considered low-risk for both parties.
Effective this month, lenders are now required to verify a borrower’s income and confirm a debt-to-income ratio of 43% or less. Borrowers who are self-employed or own their own business will find their incomes being analyzed in greater detail.
According to Peter Grabel, a loan originator at Luxury Mortgage, in Stamford, Connecticut, borrowers who have been self-employed for less than two years will find it nearly impossible to obtain financing without sufficient business tax returns.
“[Lenders] must establish the stability and continuity of the income source,” he said. “The problem for self-employed people is that they want to minimize their tax liability, but some of the ways they do so impact their ability to borrow.”
This article can be found in its original form at The New York Times.