Credit,  First Time Home Buyer,  Mortgage,  Real Estate

Easing the Path: Fannie Mae Updates Self-Employment Documentation Requirements

In a stride towards accommodating the burgeoning class of self-employed individuals seeking homeownership, Fannie Mae has updated its underwriting guidelines. As per the recent Selling Guide Announcement (SEL-2023-09) released on October 4, 2023, the documentation requirements for self-employed borrowers have been relaxed.

Previously, a self-employed borrower needed to provide a 24-month history of self-employment to qualify for a mortgage. However, with the new guidelines a lesser duration is acceptable, provided the borrower submits one year of personal and business tax returns and can prove that they have been self-employed in the same field for at least five years. This change is a significant step towards reducing the paperwork and the associated time and effort required for self-employed individuals aspiring to own a home.

The updated guidelines will be effective for all Fannie Mae loan casefiles created on or after January 1, 2024, and manually underwritten loans with application dates on or after the same date.

Fannie Mae’s initiative to ease documentation requirements reflects a broader industry trend of adapting to the evolving workforce landscape, where self-employment and gig economy roles are becoming increasingly prevalent. By doing so, Fannie Mae not only simplifies the mortgage application process but also extends homeownership opportunities to a wider demographic.

The full details of the update can be found on the Selling Guide Updates page.