Selling Guide

Published June 3, 2020

The Selling Guide is organized into parts that reflect how lenders generally categorize various aspects of their business relationship with Fannie Mae. To begin browsing, select from any of the sections below. You may also download the entire Selling Guide in PDF format.

View All Selling Policy Updates

Download PDF

Hint: Ask in a form of a question.

For best results, pose your search like a question.

B3-3.4-03, Analyzing Returns for a Corporation (06/05/2019)


This topic contains information on analyzing returns for corporations, including:



Corporations use IRS Form 1120 to report their taxes. See B3-3.2-02, Business Structures, for more information on corporations.


Corporate Fiscal Year

When funds from a corporation that operates on a fiscal year that is different from the calendar year are used in qualifying a self-employed borrower, the lender must make time adjustments to relate the corporate income to the borrower’s individual tax return, which is on a calendar year basis.


Determining the Corporation’s Financial Position

After determining the income available to the borrower for qualifying purposes, the lender must evaluate the overall financial position of the corporation. Ordinary income from the corporation can be used to qualify the borrower only if the following requirements are met:

  • the business income must be stable and consistent,

  • the sales and earnings trends must be positive, and

  • the business must have adequate liquidity to support the borrower’s withdrawals of cash without having severe negative effects.


Borrower’s Share of Income or Loss

The cash flow analysis can only consider the borrower’s share of the business income or loss, taking into consideration adjustments to business income provided below. Earnings may not be used unless the borrower owns 100% of the business.


Adjustments to Cash Flow

Items that can be added back to the business cash flow include depreciation, depletion, amortization, casualty losses, net operating losses, and other special deductions that are not consistent and recurring.

The following items should be subtracted from the business cash flow:

  • travel and meals exclusion,

  • tax liability and amount of any dividends, and

  • the total amount of obligations on mortgages, notes, or bonds that are payable in less than one year. These adjustments are not required if there is evidence that these obligations roll over regularly and/or the business has sufficient liquid assets to cover them.

Have You Tried Ask Poli?

Poli knows. Just ask.

Ask Poli features exclusive Q&As and
more—plus official Selling & Servicing

Try Ask Poli

Related Articles

B3-3.4-01, Analyzing Partnership Returns for a Partnership or LLC (06/05/2019)

IntroductionThis topic contains information on analyzing partnership returns for a partnership or LLC, including: Overview  Evaluating the Business...

Read more

B3-3.4-02, Analyzing Returns for an S Corporation (06/05/2019)

IntroductionThis topic contains information on analyzing returns for an S corporation, including: Overview  Evaluating the Business Income ...

Read more

Have guide questions? Get answers to all of your policy questions, straight from the source.

Get Started
Having Issues with Seeing this Page Correctly?

Use Firefox or Chrome   How to do a hard refresh in Internet Explorer
We recommend that you use the latest version of FireFox or Chrome.

Download Firefox
Download Chrome
  A hard refresh will clear the browsers cache for a specific page and force the most recent version of a page.
    Hold the Ctrl key and press the F5 key.

Email Us
If you still have Technical Support questions, feel free to