I read that the FHA recently relaxed their self-employment guidelines and will use the previous year income vs avg of two previous years. True?

Asked by David Naffis, 20037 Fri May 6, 2011

Is this currently in effect and could someone point me to the specific FHA guidelines or laws?

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John Settles…, , Washington, DC
Mon May 9, 2011
I have done loans for many borrowers with less than 2 years of employment, however, you, like them, will have to show Related Experience. Here is the language from the FHA Underwriting Manual.

"Between one and two years: An individual self-employed between one
and two years must have at least two years of documented previous
successful employment (or a combination of one year of employment and
formal education or training), in the line of work in which the borrower is
self-employed or in a related occupation to be eligible.
• Less than one year: The income from borrowers self-employed less than
one year may not be considered as effective income."
Web Reference:  http://www.jfsettles.com
1 vote
Gregorio Den…, , San Diego, CA
Fri May 6, 2011
Where did you read that? It may be possible to get an automated underwriting approval that only requires 1 year of tax returns for a self-employed borrower, but there is no general relaxing of self employment guidelines. For self employed borrowers, 2 years of tax returns is still the standard requirement. All FHA changes and announcements are done to approved FHA mortgagees in the form of a mortgagee letter. All prior announcements can be found here: http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/

Also note that FHA.gov and Hud.Gov are the official FHA links. Any other sites with FHA in them are not official and may contain erroneous information.
Web Reference:  http://WeFixRates.Com
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