Calculations of Self Employed Income For Full Doc loans

Self-Employment Income.

Net income from self-employment shall be based on the previous two years Federal tax returns in addition to, if available, current years income and expenses. Self-employment income can be calculated as follows: 

A two year average of the net profit (item # 31 on 1040 Schedule C or item # 36 on 1040 Schedule F) typically serves as self-employment income for loan purposes. In addition, it is permissible to add back to the net profit certain deductible items, specifically: