Freddie Mac
Business returns are always required for self-employed borrowers for businesses from which income is being used to qualify. If 1040s show a business loss, the underwriter will include the loss but does not need to condition for business returns.
Fannie Mae
Business tax returns may be waived if the borrower is paying the down payment and closing costs with his or her own funds, the borrower has been self-employed in the same business for at least five years, and the borrower’s individual tax returns show an increase in self-employment income over the past two years.
NMLS #2179146
FHA (non-streamline)
Business returns for the previous 2 years are required UNLESS:
Personal tax returns show increasing self-employment Income over the past two years;
Funds to close are not coming from business accounts; AND
The transaction is not a cash-out refinance.
VA (non-IRRRL)
No business tax returns are required if all of the following conditions are met:
Borrower proves ownership of the business for at least the past 5 years;
Individual tax returns show consistent income for the past 2 years; AND
Funds to close are not from the business.
What documents should I be ready to provide for a pre-approval?
1. Identification
Government issued ID for each borrower – this can be a state-issued driver’s license, birth certificate, or passport.
2. Proof of Income
Employees – most recent pay stubs
Self-employed – profit and loss statement
Passive income – most recent financial asset statements
3. Financial Asset Statements – At least two months of your most recent statements, including:
Bank checking and savings
Brokerage
Retirement fund – 401K, pension, self-funded ( ROTH, SEP, Individual), annuities
Trust
4. Tax Returns
Employees – W-2 forms and tax returns for the last two years.
Self Employed – Profit and loss statements, 1099, and tax returns for the last two years.
Passive Income – Tax returns for the last two years.