Selling Guide

Published December 16, 2020

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What if wages are reported on the tax return for a self-employed borrower?

Wages, Salary, and Tips

If an amount is shown for wages, salary, or tips for a self-employed borrower, it may mean:

  • the borrower operates as a corporation and pays himself or herself a salary or
  • the borrower’s spouse is employed and receives a salary (either from the borrower’s business or from another employer).

If the income relates to the borrower’s spouse who is employed by another company and the income will be used in qualifying for the mortgage, the spouse’s income must be verified directly with his or her employer since it may be more appropriate to use the spouse’s current earnings in underwriting the mortgage. Any income that is based on current earnings or that will not be used for qualifying purposes should be deducted from the borrower’s cash flow.

Refer to B3-3.3-02, Income Reported on IRS Form 1040 for additional information.

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