VA Underwriting Guidelines 

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VA Self Employed Guidelines

Analyzing self employed income is pretty tricky for any type of mortgage and VA guidelines require the same detail.  Many times the tax benefits of being self employed are a catch 22.

Self Employed Income Documentation

Current financial statements prepared in a generally recognized format, including year-to-date profit and loss statement and a current balance sheet are all required.

Note: The financial statements must be sufficient for a loan underwriter to determine the necessary information for loan approval. 

The lender may require accountant-prepared financial statements or financial statements audited by a Certified Public Accountant if needed to make such a determination due to the nature of the business or the content of the financial statements. 

Individual income tax returns, signed and dated, plus all applicable schedules for the previous two years (or additional periods if needed to demonstrate a satisfactory earnings record). 

If the most recent years tax return has not yet been prepared, provide a profit and loss statement for that year, and if the business is a corporation or partnership: Copies of the signed federal business income tax returns for the previous two years plus all applicable schedules, and a list of all stockholders or partners showing the interest each holds in the business. 

Analysis

Generally, income from self-employment is considered stable when the applicant has been in business for at least two years.

Less than two years cannot usually be considered stable unless the applicant has had previous related employment and/or extensive specialized training. 

Less than one year can rarely qualify. In-depth development is required for a conclusion of stable income on less than one year cases. 

Analyze the general economic outlook for similar businesses to determine whether the business can be expected to generate sufficient income for the applicants future needs. 

If the business shows a steady or significant decline in earnings over the period analyzed, the reasons for such decline must be analyzed to determine whether the trend is likely to continue or be reversed. 

If the business is unusual and it is difficult to determine the probability of continued operation, obtain an opinion on viability and future earnings, and an explanation of the function and financial operations of the business from a qualified party. 

Depreciation claimed as a deduction on the tax returns and financial statements of the business may be included in effective income. 

 

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