July 7, 2020
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Real Estate & Business

Scott Sheldon
How the new PPP loan may adversely affect your mortgage
May 15, 2020

If you’re looking for mortgage loan financing and you have taken out or considering the new federal paycheck Protection Program mortgage loan here’s some things you need to know…

Residential Mortgage financing does require a certain amount of monthly income and having expenses that are low enough to be in alignment with a new proposed mortgage payment. Fannie Mae and Freddie Mac consider this new loan to be a business loan and as such, they will treat this loan as a liability and it will negatively affect your debt to income ratio, aka your borrowing power. So while the terms of this particular loan are very favorable from an income standpoint during the COVID-19 pandemic it can become problematic if you’re self-employed and have a desire to buy a house or refinance a house that you already own with mortgage financing.

Here is what you need to do. Have a conversation with your lender and explain to them what you’re doing. If you are getting the PPP loan, please understand if you supply documents to the lender showing the income deposit, that will trigger questions that will parlay into needing the terms of your new obligation. This then will translate into higher expenses driving your borrowing power down. This loan is not secured by real estate, it is not reported to credit reporting agencies and there is no personal guarantee. The lender will consider this loan an obligation and will count it even though it is forgivable from the government.

The PPP is something that you will have to account for in determining whether you are going to take on mortgage loan financing. If you have enough income to support the obligation that you desire, trying to qualify for it might not be problematic, but if there is lower income or higher expenses, for some families it could be problematic and something that should be discussed with the mortgage professional of your choice when determining what lender to go with for purchasing or refinancing a home.


Scott Sheldon is a local mortgage lender, with a decade of experience helping consumers purchase and refinance primary homes second homes and investment properties. Learn more at