For self-employed FHA mortgage applicants, the lender must obtain complete individual federal income tax returns for the most recent 2 years, including all schedules. The FHA mortgage applicants’s business tax returns for the most recent 2 years must also be obtained unless the following criteria are met:
• individual federal income tax returns show increasing Self-Employment Income over the past 2 years;
• funds to close are not coming from business accounts; and
• the mortgage to be insured is not a cash-out refinance. A year-to-date Profit and Loss (P&L) statement and balance sheet must be obtained if more than a calendar quarter has elapsed since date of most recent calendar or fiscal year-end tax return was filed by the FHA mortgage applicants. A balance sheet is not required for self-employed FHA mortgage applicants filing Schedule C income. If income used to qualify the FHA mortgage applicants exceeds the 2 year average of tax returns, an audited P&L or signed quarterly tax return must be obtained from the IRS. For Commission Income less than or equal to 25 percent of the FHA mortgage applicants’ total earnings, the lender must use traditional or alternative employment documentation.  For Commission Income greater than 25 percent of the FHA mortgage applicants’s total earnings, the lender must obtain signed tax returns, including all applicable schedules, for the last 2 years.  

For both Self-Employment and Commission Income, in lieu of signed individual or business tax returns from the FHA mortgage applicants, the lender may obtain a signed IRS Form 4506, Request for Copy of Tax Return, IRS Form 4506-T, Request for Transcript of Tax Return, or IRS Form 8821, Tax Information Authorization, and tax transcripts directly from the IRS. 

FHA mortgage lenders qualifying income