Overview
You may have run across a borrower who is personally obligated to a mortgage (as indicated on a credit report) but reports the income through a business entity using form IRS forms 1065 or 1120S. FNMA guidelines B3-3.1-08 break down the process and requirements needed to get this right!
The key training points in this video are :
- What does FNMA B3-3.1-08 require from the seller
- What is the 8825 form
- What business use the 8825 form
- How to properly calculate the income or loss from the 8825
If you work with borrowers who have a plan to own and acquire rental properties, this is a must watch video for you. Learn who can qualify and who can’t to stand out as a mortgage leader in your market of savvy investment property landlords.
Mike exclellent video however I have one question, I thought you could not put commercial property on the Reo section of the 1003. Therefore how could you give the borrower income or off set it after doing rental worksheet.
Hi Mike
The 8825 rule has one key requirement, the borrower has personally financed the property listed on the 8825. This rule works across the board regardless if the property is residential or commercial in nature. If you are reviewing a business return and the property is not personally financed then you don’t follow these rules and you follow the standard business review rules for income.
Keep in mind this rule is a FNMA rule only, FHLMC rental rules now in place (and mandatory on 02/09) do not follow this 8825 rule. FHLMC directly guides us to only follow the standard business income review.
Thanks
Michael Whitbeck