Which borrower is classified as self-employed for underwriting purposes?

A borrower is classified as self-employed for underwriting purposes if they have a significant ownership stake in a business, typically involving some level of operational control or financial risk. In this case, owning 30% of a company indicates that the borrower has a considerable interest in the business. This ownership structure often implies that the borrower is involved in the management and decision-making processes, which characterizes self-employment.

When assessing borrower classifications, lenders look at ownership percentages; a substantial ownership often leads to a self-employed classification. Borrowers who are reported as earning a salary through W-2s are generally considered employees, not self-employed, since their income source is from an employer rather than from business profit or ownership. Additionally, while filing Form 2106 (often related to employee business expenses) may indicate some form of self-employment-related deductions, it is not a definitive mark of self-employment itself. The focus is primarily on ownership stakes in a business when determining self-employed status, which is why the borrower owning 30% of a company fits the criteria.