Self-Employed Borrowers Need 2 Years?

Self Employment Rule in Arizona

This is a great question!  One that is oftentimes answered by mortgage professionals inaccurately.  Yes, the general rule in the mortgage world is 2 years.  Typical/standard mortgage guidelines for FHA, VA, Conventional, USDA Phoenix mortgages require that a self-employed borrower show a 2 year history of self employment.  However, we need to view mortgage rules the same way Superman views a steel pipe – from time to time they need to be bent.

Now don’t take that the wrong way.  Bending mortgage rules is a metaphor for digging deeper and not for doing anything even close to out bounds.   The challenge is that many Phoenix loan officers provide the standard canned reply “you must have 2 years self employment history.”   In reality, even today’s strict mortgage environment allows for exceptions to the 2 year self employment rule in certain scenarios.  It is important to examine every option in every scenario to find out what a clients mortgage options are.

Why is There a 2 Year Self-Employment Rule?

Before we jump into how to get around the rule, let’s look at why the rule exists in the first place.  Arizona Mortgage guidelines typically require a two-year history from self-employed borrower to show that the borrower has been able to  successfully establish a profitable business.  The two-year time-frame also shows that the borrower has the ability to effectively manage and maintain a business that they themselves are ultimately responsible for.  After all, in most cases the business is a new venture for the newly self employed borrower.  As with anything new, there is a learning curve that a Phoenix Arizona home buyer will experience as they try their hand at being CEO of their own world!

What Exceptions Can be Made to 2 Year Self-Employed Rule?

As an Arizona Mortgage Lender, many self-employed clients of mine decided to take the leap from employee to self-employed while staying within the same industry that they have worked in for years.  When a borrower goes from worker to boss and becomes categorized as self-employed in the same field they have worked in, Arizona mortgage underwriters tend to soften up.  When a borrower is not changing the type of work they do and they are simply going from getting a paycheck to writing the paychecks mortgage underwriters can accept that the learning curve is nowhere near as steep as if the borrower was trying to make a living at something they don’t quite have down pat yet.

Borrowers that are transitioning to self-employed within the same field that they already know and love can potentially qualify for a mortgage with only 1 year’s  experience as a self-employed individual rather than the standard 2 years.  It is very important  to note that exceptions to the standard two-year self employment rule are granted on a case by case basis.  To determine if the exception applies, your Arizona Mortgage Lender needs to submit a full loan application/file along with supporting documentation to explain why a one year exception should be granted for underwriting review and approval.

My team and I are very experienced in working with self-employed borrowers.  We are also able to submit full files for full underwriting approval to our in-house underwriting department prior to any of our valued clients going out and shopping for a home.  This allows us to help our self-employed clients know if a one year history of self employment will be enough to obtain an Arizona mortgage approval.

Call me today if you have any questions, we are here to help.  You can also APPLY NOW!

By Jeremy House



  1. […] Fannie Mae’s automated underwriting system known as “DU” now determines if a the self-employed borrower may provide just 1 year’s Federal Income Tax returns.   Regardless of how many years of tax returns are required, most self borrowers must be self employed for 2 years. Learn more about exceptions to the 2 year self employment history. […]

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