Debts Paid by a Self-Employed Person’s Company

Freddie Mac made a change recently that allows the exclusion of a monthly debt payment from the debt ratio calculation for self-employed mortgage borrowers when the monthly payment is paid by the mortgage borrower’s business. But this is subject to a few rules:

The debt has to have been paid by the mortgage borrower’s business for 12 months or longer.

The mortgage borrower’s tax returns must show that business expenses associated with the debt such as interest, lease payments, taxes and insurance, have been reported and support that the debt has been paid by the business.

This is a good change for self-employed mortgage borrowers who previously may have had that debt counted against their debt ratios.

Restrictions may apply.