One of the biggest problems right now is a requirement that borrowers prove their incomes by relying on at least two years of tax returns. That often trips up self-employed workers and small-business owners who take deductions that shrink their taxable income. It could also sink borrowers who were unemployed for a short time or had a recent salary reduction. The consequence is that lending is bifurcating into two worlds. Salaried workers who can easily document their earnings are able to qualify for mortgages with down payments as low as 3.5% through the FHA. Self-employed borrowers are having a harder time even if they have assets stashed away.
“Housing Shaky as Lenders Tighten” Wall Street Journal 12/13/10
