Schedule K-1 Income
The following table provides verification of income requirements for borrowers who have less than 25% ownership of a partnership, S corporation, or limited liability company (LLC). For borrowers who have more than 25% ownership, lenders must follow the verification of income requirements for self-employed borrowers. See B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower for additional information.
✓ | Verification of Schedule K-1 Income |
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The borrower must provide the most recent two years of
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Income reported on Schedule K-1 can only be considered if the lender obtains documentation verifying that
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The lender is not required to analyze the viability of the business in accordance with self-employment requirements and may only use the borrower's proportionate share of earnings reflected on Schedule K-1 when calculating the borrower's income. | |
If the borrower has a two-year history of receiving “guaranteed payments to the partner” from a partnership or an LLC, these payments can be added to the borrower’s cash flow. |
For additional information, see FAQs: Analyzing Self-Employment Income and B3-3.1-09, Other Sources of Income.