Mortgage documents checklist
What lenders usually ask for, grouped by situation, with why the underwriter needs each one. Check items off as you gather them; your checks stay in this browser only. Your lender may ask for less, or for more.
This is general education. Lenders can ask for more than the program minimums, and an automated underwriting finding can ask for less. The list in your lender’s conditions is the one that counts.
The checklist
Everyone
Most files need these, whatever your income type.
Why they ask: Lenders verify employment, income, and accounts directly. Instead of a separate form for each, the lender may have you sign one blanket authorization.
Source: Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets (05/04/2022); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026Why they ask: It lets the lender get transcripts of your tax returns from the IRS to compare with the returns you provided. The IRS sends them only after you approve the request, in your IRS online account or by signing the form.
Source: Fannie Mae Selling Guide B3-3.1-02, Tax Return and Transcript Documentation Requirements (06/03/2026); IRS: “Income Verification Express Service for taxpayers” (page last reviewed or updated Apr 19, 2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: They show the money for the down payment, closing costs, and reserves. Fannie Mae asks for the most recent two months of activity on a purchase and one month on a refinance; FHA, VA, and USDA accept a Verification of Deposit or recent statements.
Source: Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets (05/04/2022); HUD Handbook 4000.1, II.A.4.d.iii Sources of Funds (TOTAL): Checking and Savings Accounts; Gifts (Personal and Equity) (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: Underwriters must make sure money isn’t borrowed or from an undisclosed source. Fannie Mae (on a purchase, when the funds are needed) and FHA document single deposits over 50% of monthly income; USDA investigates non-wage deposits over $1,000 and recurring ones.
Source: Fannie Mae Selling Guide B3-4.2-02, Depository Accounts (12/14/2022); HUD Handbook 4000.1, II.A.4.d.iii Sources of Funds (TOTAL): Checking and Savings Accounts; Gifts (Personal and Equity) (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: A copy of the check or receipt shows where the deposit came from, so it can be counted.
Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: Inquiries can mean new debt that isn’t on the application. FHA manual underwriting needs a written explanation for inquiries in the last 90 days, and USDA lenders must investigate inquiries made in the 90 days before the credit report.
Source: HUD Handbook 4000.1, II.A.5.a.iii Housing Obligations/Mortgage Payment History (Manual) and II.A.5.a.iv(B) Undisclosed Debt and Inquiries (Manual) (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 10 (rev 08-05-25), paragraph 10.2 and Attachment 10-A (credit report age, inquiries, undisclosed debts, rent history) · checked Nov 10, 2026
W-2 employees
If you’re paid wages or salary.
Why they ask: They confirm current pay. Fannie Mae and USDA want stubs dated no earlier than 30 days before the application; VA’s alternative documentation uses stubs covering at least the most recent 30 days.
Source: Fannie Mae Selling Guide B3-3.2-01, Standards for Employment and Income Documentation (03/04/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026Why they ask: They show your earnings history. Fannie Mae asks for one or two years depending on the case; USDA’s full documentation uses the most recent two tax years.
Source: Fannie Mae Selling Guide B3-3.2-01, Standards for Employment and Income Documentation (03/04/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026Why they ask: The lender verifies your job in writing or electronically, then confirms again shortly before closing that you’re still employed. See verifications below.
Source: Fannie Mae Selling Guide B3-3.1-04, Verbal Verification of Employment (10/07/2026); HUD Handbook 4000.1, II.A.4.c.ii Employment Related Income (TOTAL) (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Self-employed borrowers
Fannie Mae, FHA, and USDA treat you as self-employed if you own 25% or more of a business. Read how self-employed income is figured first.Source: Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Why they ask: Qualifying income comes from your returns. Signed returns or IRS transcripts; Fannie Mae allows one year in some cases.
Source: Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: Needed when you own 25% or more, unless the program’s waiver conditions are met, so the lender can analyze the business itself.
Source: Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: It shows how the business is doing since the last return. FHA requires one if more than a calendar quarter has passed since the end of the last tax year; VA and USDA ask for one too.
Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: FHA asks for one with the profit and loss statement, except for Schedule C filers; VA asks for one as well.
Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026Why they ask: K-1s report your share of the business income, which counts only with a history of distributions or proof the business can afford them.
Source: Fannie Mae Selling Guide B3-3.6-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 (05/07/2025); Fannie Mae Selling Guide B3-3.4-19, Schedule K-1 Income <25% Ownership (10/07/2026) · checked Nov 10, 2026Why they ask: Fannie Mae requires separate forms for personal and business transcripts.
Source: Fannie Mae Selling Guide B3-3.1-02, Tax Return and Transcript Documentation Requirements (06/03/2026) · checked Nov 10, 2026Why they ask: Fannie Mae requires confirming the business exists within 120 calendar days before the note date; USDA confirms it is operating within 30 days of closing.
Source: Fannie Mae Selling Guide B3-3.1-04, Verbal Verification of Employment (10/07/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: Business funds can count if you’re an owner of the account, and the lender must check that taking them out won’t hurt the business.
Source: Fannie Mae Selling Guide B3-4.2-02, Depository Accounts (12/14/2022); Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023) · checked Nov 10, 2026
Retirement income
Pensions, annuities, and retirement account withdrawals.
Why they ask: It shows the type of income, the amount, and how often it’s paid. Fannie Mae also accepts a bank statement, a tax return, a W-2, or a 1099 showing the income.
Source: Fannie Mae Selling Guide B3-3.4-03, Annuity, Pension, or Retirement Income (10/07/2026) · checked Nov 10, 2026Why they ask: They show the vested balance and the withdrawal terms. Income drawn from an account must be expected to continue for at least three years.
Source: Fannie Mae Selling Guide B3-4.3-03, Retirement Accounts (06/30/2015); Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets (05/04/2022); Fannie Mae Selling Guide B3-3.4-03, Annuity, Pension, or Retirement Income (10/07/2026) · checked Nov 10, 2026
Investment or other income
Brokerage accounts and rental property you already own.
Why they ask: It verifies ownership and the value that can count toward the down payment, closing costs, or reserves.
Source: Fannie Mae Selling Guide B3-4.3-01, Stocks, Stock Options, Bonds, and Mutual Funds (06/30/2015) · checked Nov 10, 2026Why they ask: Rental income is figured from Schedule E, or in some cases from the lease, and the property’s own payment is subtracted.
Source: Fannie Mae Selling Guide B3-3.8-04, Rental Income from Non-Subject Property (09/02/2026) · checked Nov 10, 2026
Gift recipients
If a relative or other allowed donor is giving you money for the purchase.
Why they ask: It must state the dollar amount, that no repayment is expected, and the donor’s name, address, phone number, and relationship to you. FHA requires it signed and dated by both the donor and you. Donors generally can’t be the builder, the real estate agent, or another party with an interest in the sale; Fannie Mae allows a seller who is also an acceptable donor, such as a relative, and isn’t affiliated with another interested party.
Source: Fannie Mae Selling Guide B3-4.3-04, Personal Gifts (02/04/2026); HUD Handbook 4000.1, II.A.4.d.iii Sources of Funds (TOTAL): Checking and Savings Accounts; Gifts (Personal and Equity) (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026Why they ask: For example, the donor’s check and your deposit slip, or an electronic transfer record. FHA and USDA don’t accept a donor’s cash on hand as the source.
Source: Fannie Mae Selling Guide B3-4.3-04, Personal Gifts (02/04/2026); HUD Handbook 4000.1, II.A.4.d.iii Sources of Funds (TOTAL): Checking and Savings Accounts; Gifts (Personal and Equity) (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Divorced, separated, or paying or receiving support
Support received may count as income; support paid counts against you as a debt. The rules by program are on Child support and alimony.
Why they ask: It shows the amount and how long payments last. Programs use it to decide whether support received counts as income and how support paid counts as a debt.
Source: HUD Handbook 4000.1, II.A.4.c.xii(B) Alimony, Child Support, and Maintenance Income, and II.A.4.c.xii(P) Nontaxable Income (Grossing Up); Fannie Mae Selling Guide B3-3.4-02, Alimony, Child Support, Equalization Payments, or Separate Maintenance (10/07/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.8 and Attachment 9-A (Child Support; Separate Maintenance/Alimony) · checked Nov 9, 2026Why they ask: Programs require a history of consistent receipt before support counts as income.
Source: HUD Handbook 4000.1, II.A.4.c.xii(B) Alimony, Child Support, and Maintenance Income, and II.A.4.c.xii(P) Nontaxable Income (Grossing Up); Fannie Mae Selling Guide B3-3.4-02, Alimony, Child Support, Equalization Payments, or Separate Maintenance (10/07/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.8 and Attachment 9-A (Child Support; Separate Maintenance/Alimony) · checked Nov 9, 2026
Renters and current homeowners
Your current housing payments are part of your credit picture.
Why they ask: FHA manual underwriting verifies 12 months of housing history; VA files that get a Refer verify 24 months of rent; USDA verifies housing payments from the last 12 months and won’t use a family member’s rent history without 12 months of canceled checks or receipts.
Source: HUD Handbook 4000.1, II.A.5.a.iii Housing Obligations/Mortgage Payment History (Manual) and II.A.5.a.iv(B) Undisclosed Debt and Inquiries (Manual) (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026); USDA Handbook HB-1-3555, Chapter 10 (rev 08-05-25), paragraph 10.2 and Attachment 10-A (credit report age, inquiries, undisclosed debts, rent history) · checked Nov 10, 2026Why they ask: Existing mortgages are verified and their payment history rated; a mortgage that isn’t on the credit report needs its own verification.
Source: HUD Handbook 4000.1, II.A.5.a.iii Housing Obligations/Mortgage Payment History (Manual) and II.A.5.a.iv(B) Undisclosed Debt and Inquiries (Manual) (last revised 8/12/2026); HUD Handbook 4000.1, II.A.4.b.iii(K) Housing Obligations/Mortgage Payment History and II.A.4.b.iv(B)–(C) Undisclosed Debt (TOTAL) (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
VA borrowers
Extra items for a VA-guaranteed loan.
Why they ask: Veterans need discharge or separation papers (DD214) to request a COE; active-duty service members need a statement of service signed by their commander, adjutant, or personnel officer.
Source: VA: “How to request a VA home loan Certificate of Eligibility (COE)” (page last updated Sep 22, 2026) · checked Nov 10, 2026Why they ask: VA uses the LES instead of a verification of employment. It must be no more than 120 days old (180 for new construction).
Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
Self-employed income: your gross isn’t your income
A common surprise for self-employed borrowers: lenders don’t treat your gross receipts, the total your business took in, as your income. They start from the net profit on your tax returns, after business expenses, and then adjust it. It isn’t the adjusted gross income on your Form 1040 either; that is a separate tax figure.
Source: Fannie Mae Selling Guide B3-3.6-03, Income or Loss Reported on IRS Form 1040, Schedule C (04/01/2009); Fannie Mae Form 1084, Cash Flow Analysis (June 2019); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); IRS: “Definition of adjusted gross income” (page last reviewed or updated Nov 5, 2026) · checked Nov 10, 2026Three different numbers
| Number | What it is | Used to qualify? |
|---|---|---|
| Gross receipts | Everything the business took in before expenses. | No. Expenses come out first: the worksheet starts from net profit or loss.Source: Fannie Mae Form 1084, Cash Flow Analysis (June 2019) · checked Nov 10, 2026 |
| Adjusted gross income (AGI) | A tax figure: total income from all sources minus certain adjustments, figured on Form 1040 before the standard or itemized deduction.Source: IRS: “Definition of adjusted gross income” (page last reviewed or updated Nov 5, 2026) · checked Nov 10, 2026 | Not directly. The cash flow analysis works line by line from the schedules (W-2 wages from your business, Schedule C, K-1s, and so on), not from the AGI total.Source: Fannie Mae Form 1084, Cash Flow Analysis (June 2019) · checked Nov 10, 2026 |
| Qualifying income | The lender’s figure: net profit, minus nonrecurring income, plus certain non-cash deductions added back, judged over time. | Yes. This is the income used in your debt-to-income ratio.Source: Fannie Mae Selling Guide B3-3.6-03, Income or Loss Reported on IRS Form 1040, Schedule C (04/01/2009); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026) · checked Nov 10, 2026 |
Schedule C: net profit plus add-backs
For a sole proprietor, Fannie Mae’s cash flow worksheet (Form 1084) starts with Schedule C net profit or loss. Nonrecurring income is subtracted, and depreciation, depletion, business use of your home, amortization, and casualty losses are added back, because they reduce taxable profit without being cash you spent that year. Travel and meal expenses that aren’t deductible are subtracted.Source: Fannie Mae Selling Guide B3-3.6-03, Income or Loss Reported on IRS Form 1040, Schedule C (04/01/2009); Fannie Mae Form 1084, Cash Flow Analysis (June 2019) · checked Nov 10, 2026 FHA allows the same kinds of add-backs to Schedule C income.Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026) · checked Nov 10, 2026 USDA lets lenders add back depreciation, depletion, business use of home, and other paper deductions, and points to Form 1084.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Two years, and the trend
- Two years of history is the general rule: Fannie Mae generally requires a two-year history (less in some cases), FHA requires two years of self-employment (or one to two years after two years in the same line of work), and VA treats self-employment income as stable after two years.Source: Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- Averaging: FHA uses the lesser of the two-year average or the most recent one-year average.Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026) · checked Nov 10, 2026 Fannie Mae requires the lender to measure year-to-year trends in gross income, expenses, and taxable income.Source: Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023) · checked Nov 10, 2026
- Declining income gets flagged. FHA: a decline of more than 20% over the period sends the loan to manual underwriting. USDA: a change of 20% or more from the previous 12 months may require more documentation. VA: a steady or significant decline must be analyzed.Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026); USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts); VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
Partnerships and S corporations (K-1s and Form 1120S)
- A Schedule K-1 reports your share of a partnership’s (Form 1065) or S corporation’s (Form 1120S) income. Ordinary income on the K-1 can count only if you have a documented, stable history of distributions, or the business has enough liquidity to support the withdrawal. Guaranteed payments to a partner can count with a two-year history.Source: Fannie Mae Selling Guide B3-3.6-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 (05/07/2025); Fannie Mae Form 1084, Cash Flow Analysis (June 2019) · checked Nov 10, 2026
- With 25% or more ownership, the lender also analyzes the business returns. On Form 1084 the business’s depreciation, depletion, and amortization are added back, notes payable in less than a year and non-deductible travel and entertainment are subtracted, and the total is multiplied by your ownership share.Source: Fannie Mae Form 1084, Cash Flow Analysis (June 2019); Fannie Mae Selling Guide B3-3.7-02, Analyzing Returns for an S Corporation (02/07/2024) · checked Nov 10, 2026
- S corporation owners are often also paid W-2 wages by the corporation; those are counted as wages on the worksheet, separately from the K-1.Source: Fannie Mae Form 1084, Cash Flow Analysis (June 2019); HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026) · checked Nov 10, 2026
- With less than 25% ownership, K-1 income has its own, lighter documentation rules.Source: Fannie Mae Selling Guide B3-3.4-19, Schedule K-1 Income <25% Ownership (10/07/2026) · checked Nov 10, 2026
Example: made-up round numbers
A sole proprietor’s qualifying income
These numbers are invented to show the method. They aren’t typical, and they aren’t a calculation of anyone’s income.
| From Schedule C | Year 1 | Year 2 |
|---|---|---|
| Gross receipts (not used to qualify) | $200,000 | $210,000 |
| Minus business expenses | −$150,000 | −$160,000 |
| Net profit (the starting point) | $50,000 | $50,000 |
| Add back depreciation | +$10,000 | +$8,000 |
| Add back business use of home | +$2,000 | +$2,000 |
| Adjusted cash flow | $62,000 | $60,000 |
- Two-year average: ($62,000 + $60,000) ÷ 2 = $61,000 a year, or about $5,083 a month.
- FHA’s method uses the lesser of that and the most recent year: $60,000 a year, or $5,000 a month.
- Year 2 is about 3% lower than year 1, well under FHA’s 20% decline threshold, but an underwriter will still look at the trend.
- The borrower might think of the business as a $210,000 income. For qualifying, it’s about $60,000.
Questions about your own returns belong with a licensed loan officer and your tax preparer. Deductions that lower your taxable profit generally lower your qualifying income too, except the add-backs listed above.
Verifications and when they happen
Besides the documents you hand over, the lender verifies some things directly. Each card below links to the step on the stages of a mortgage timeline where it usually happens.
Written verification of employment
Happens at: Submission to underwriting
Your employer confirms your job, pay, and history, usually early in processing.
- Fannie Mae: Form 1005, completed by the employer, or a third-party verification vendor.Source: Fannie Mae Selling Guide B3-3.2-01, Standards for Employment and Income Documentation (03/04/2026) · checked Nov 10, 2026
- FHA: A written VOE covering two years with the most recent pay stub, or an electronic VOE covering two years.Source: HUD Handbook 4000.1, II.A.4.c.ii Employment Related Income (TOTAL) (last revised 8/12/2026) · checked Nov 10, 2026
- VA: A VOE and pay stubs no more than 120 days old (180 for new construction).Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: Form RD 1910-5, an employer or vendor electronic verification, or an equivalent HUD, VA, Fannie Mae, or Freddie Mac form, compared with a recent pay stub.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Verbal verification of employment (reverification)
Happens at: Final underwriting
A last check, close to closing, that you still work where the application says.
- Fannie Mae: No more than 10 business days before the note date for employment income; it can also be done after closing, up to delivery of the loan.Source: Fannie Mae Selling Guide B3-3.1-04, Verbal Verification of Employment (10/07/2026) · checked Nov 10, 2026
- FHA: Within 10 days before the date of the note.Source: HUD Handbook 4000.1, II.A.4.c.ii Employment Related Income (TOTAL) (last revised 8/12/2026) · checked Nov 10, 2026
- VA: Telephone verification is part of VA’s alternative documentation; the date and the name, title, and phone number of the person who verified it are recorded.Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: Within 10 business days of closing, for every applicant.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Verification that a business is operating
Happens at: Final underwriting
For self-employed borrowers, the check that the business still exists and is active.
- Fannie Mae: No more than 120 calendar days before the note date, confirming the business exists.Source: Fannie Mae Selling Guide B3-3.1-04, Verbal Verification of Employment (10/07/2026) · checked Nov 10, 2026
- USDA: Within 30 days of closing, using evidence such as a website or licensing bureau certification.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Verification of deposit (VOD) and bank statements
Happens at: Initial underwriting
Confirms the money for the down payment, closing costs, and reserves, and where large deposits came from.
- Fannie Mae: Form 1006 sent directly by the bank, or statements covering two months (purchase) or one month (refinance).Source: Fannie Mae Selling Guide B3-4.2-01, Verification of Deposits and Assets (05/04/2022) · checked Nov 10, 2026
- FHA: A written VOD with the most recent statement, or a third-party verification.Source: HUD Handbook 4000.1, II.A.4.d.iii Sources of Funds (TOTAL): Checking and Savings Accounts; Gifts (Personal and Equity) (last revised 8/12/2026) · checked Nov 10, 2026
- VA: VA Form 26-8497a or the last two bank statements.Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: Two months of statements, or a VOD with a recent statement, or a third-party verification.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Verification of rent or mortgage (VOR or VOM)
Happens at: Initial underwriting
Confirms your current housing payments were made on time.
- FHA: Manual underwriting: 12 months by credit report, a VOR from the landlord, a VOM from the servicer, or canceled checks.Source: HUD Handbook 4000.1, II.A.5.a.iii Housing Obligations/Mortgage Payment History (Manual) and II.A.5.a.iv(B) Undisclosed Debt and Inquiries (Manual) (last revised 8/12/2026) · checked Nov 10, 2026
- VA: Refer files: a 24-month rental history from the landlord, the credit report, or canceled checks. Accept files: no verification of rent required.Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: GUS Accept files: no VOR required. Refer and manual files: a VOR may be required.Source: USDA Handbook HB-1-3555, Chapter 10 (rev 08-05-25), paragraph 10.2 and Attachment 10-A (credit report age, inquiries, undisclosed debts, rent history) · checked Nov 10, 2026
IRS tax transcripts (Form 4506-C)
Happens at: Application
Matches the returns you gave the lender against IRS records.
- Fannie Mae: Signed by each borrower whose income is used, at or before closing. Transcripts received before closing must be used to verify income.Source: Fannie Mae Selling Guide B3-3.1-02, Tax Return and Transcript Documentation Requirements (06/03/2026) · checked Nov 10, 2026
- FHA: Transcripts from the IRS can be used in place of signed returns for self-employed borrowers.Source: HUD Handbook 4000.1, II.A.4.c.x Self-Employment Income (TOTAL), and Appendix 2.0, Analyzing IRS Forms (last revised 8/12/2026) · checked Nov 10, 2026
- USDA: Signed for the previous two tax years at the time of submission to USDA, for full transcripts with all schedules.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
Credit refresh and the check for new or undisclosed debt
Happens at: Final underwriting
Makes sure nothing changed between the application and closing.
- Fannie Mae: Credit documents, including the credit report, can be no more than four months old on the note date. Changed data are resubmitted to DU.Source: Fannie Mae Selling Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns (04/02/2025); Fannie Mae Selling Guide B3-2-01, General Information on DU (04/01/2026) · checked Nov 10, 2026
- FHA: Documents can be no more than 120 days old at disbursement. A newly found debt’s payment is verified, and the loan is rescored if total debts rise more than $100 a month.Source: HUD Handbook 4000.1, II.A.1.a.i(A)(1) Maximum Age of Mortgage Documents and Appraisal Validity (last revised 8/12/2026); HUD Handbook 4000.1, II.A.4.b.iii(K) Housing Obligations/Mortgage Payment History and II.A.4.b.iv(B)–(C) Undisclosed Debt (TOTAL) (last revised 8/12/2026) · checked Nov 10, 2026
- VA: The credit report and verifications must be no more than 120 days old (180 for new construction).Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: The credit report can be no more than 120 days old at closing. New debts found after the Conditional Commitment: $50 a month or less in total, the lender may keep the commitment; $51 or more, the file is resubmitted.Source: USDA Handbook HB-1-3555, Chapter 10 (rev 08-05-25), paragraph 10.2 and Attachment 10-A (credit report age, inquiries, undisclosed debts, rent history) · checked Nov 10, 2026
How old documents can be
- Fannie Mae: credit documents, including credit reports and employment, income, and asset documents, can be no more than four months old on the note date.Source: Fannie Mae Selling Guide B1-1-03, Allowable Age of Credit Documents and Federal Income Tax Returns (04/02/2025) · checked Nov 10, 2026
- FHA: no more than 120 days old at the disbursement date; tax returns and divorce decrees don’t expire this way.Source: HUD Handbook 4000.1, II.A.1.a.i(A)(1) Maximum Age of Mortgage Documents and Appraisal Validity (last revised 8/12/2026) · checked Nov 10, 2026
- VA: credit reports and verifications no more than 120 days old (180 for new construction).Source: VA Pamphlet 26-7 (VA Lenders Handbook), Chapter 4: Topic 2 (employment and self-employment income), Topic 4 (assets and gifts), Topic 7 (credit history), Topic 8 (AUS documentation tables) (KnowVA article 554400000330850, updated Aug 26, 2026) · checked Nov 10, 2026
- USDA: income and asset documents no more than 120 days old at closing; older ones must be updated.Source: USDA Handbook HB-1-3555, Chapter 9 (rev 08-05-25), paragraph 9.3 and Attachment 9-A (income documentation, assets, and gifts) · checked Nov 10, 2026
If closing slips, expect a request for newer pay stubs and statements. That is why it helps to keep gathering the latest versions until closing.
Next: see where each piece fits on the stages of a mortgage timeline.
Guidelines change; confirm with a licensed lender.