Conventional loans · Fannie Mae B3-3.5-01Self-employed buyers: how many years of tax returns Fannie Mae needs

Anyone with a 25% or greater ownership interest in a business is self-employed for Fannie Mae, and the lender studies how stable the income is, the business's location, demand and financial strength, and whether it can keep paying the borrower. Fannie Mae generally wants a two-year history: signed individual federal tax returns – and, in some cases, business returns – for the past two years with all schedules, or complete IRS transcripts instead. One year of personal and business returns is enough if the business has existed for five years and the borrower has owned 25% or more of it for those five consecutive years, with the lender's cash flow analysis (Form 1084 or equivalent) in the file. With two years of personal returns, business returns can be waived when the borrower uses personal funds for the down payment, closing costs and reserves, has been self-employed in the same business for five years, and shows rising self-employment income. Less than two years of self-employment can still count if the latest returns show a full 12 months from the current business and the borrower earned the same or more before in the same field or in a role with similar responsibilities. Because pass-through income on a Form 1040 is not always money actually distributed, the lender writes up its own analysis of what the borrower can rely on.