What percentage of commission earnings or business ownership qualifies a borrower as self-employed?

A borrower is considered self-employed if they have a certain percentage of ownership in a business or receive a particular percentage of their income from commissions. The threshold that qualifies a borrower as self-employed is typically 25%. This means that if a borrower owns 25% or more of a business or earns 25% or more of their total income from commission-based earnings, they are classified as self-employed.

Understanding the definition of self-employment is crucial for underwriting purposes, as lenders evaluate income stability and risk differently for self-employed borrowers than for those who receive a traditional salary. In many cases, self-employed individuals may be required to provide additional documentation of their income, such as tax returns or profit and loss statements, to verify their earnings against standard mortgage qualification criteria.

Therefore, the combination of needing both a 25% ownership stake and 25% of earnings from commissions establishes the correct criteria for determining self-employment status for borrowers.