We’ve heard a lot about mortgage fraud after the last several years, yet it is still a problem even with stricter guidelines.  Mortgage lender Karen Burket-Bank of Medford, Oregon shares a story about one borrower who went from a salaried employee to self-employed – and that tripped up their loan,

Just weeks before the close of escrow date on the purchase, it was learned that this borrower had gone from being a salaried wage earner, to now being self employed.  You may ask yourself, “So, what’s the big deal?  If there’s still a job, why can’t the bank still lend the money?”  The answer to that may not be as simple as one would think.

In this case, the client remained in the same line of work.  So simple, right?  Actually, no.  The typical rule of thumb when lending to a self employed individual is that the lender will want to evaluate two years worth of tax returns in order to determine income eligibility.  So in the above case, because this client just recently put themselves on a self employed status, of course, there aren’t tax returns available to determine what newly self employed earnings even exist.

It is far easier – in my opinion – to get a loan as a regular employee.  However, being self-employed does not negate your eligibility to get a home loan.  Just be careful in not committing mortgage fraud – even unknowingly.