For self-employed borrowers when can business tax returns be waived?

When two years of signed individual federal tax returns are provided, the lender may waive the requirement for business tax returns if:

• the borrower is using his or her own personal funds to pay the down payment and closing costs and satisfy applicable reserve requirements,
• the borrower has been self-employed in the same business for at least five years, and
• the borrower’s individual tax returns show an increase in self-employment income over the past two years.

For additional information, see B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower.