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: 

• • Depletion (item # 12 on Schedule C);

  • Depreciation (item # 13 on Schedule C, or item # 16 on Schedule F);

  • Interest (items #16a and #16b on Schedule C, or items # 23a and # 23b on Schedule F)