Freddie Mac made a change recently. It allows the exclusion of a monthly debt payment from the debt ratio calculation for self-employed mortgage borrowers. The debt can be excluded when the monthly payment is paid by the mortgage borrower’s business.
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. And they must support that the debt has been paid by the business. These would be expenses such as interest, lease payments, and taxes and insurance.
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.