Qualifying income
The income figure a lender actually uses when calculating your DTI — not your gross revenue, not your total deposits, and not your pay stub. For W-2 employees it’s gross wages. For self-employed borrowers on a conventional loan it’s net income from Schedule C, averaged over 2 years. For bank statement loans it’s deposit averages after the expense factor.
How does this affect your loan? Estimate self-employed qualifying income with the DTI calculator, or read the self-employed mortgage guide.
Related terms
- Schedule C — The IRS form where sole proprietors and single-member LLCs report business income and expenses. Conventional l…
- Net income — Income after all business deductions. On a tax return, this is Schedule C net profit. It’s the number conventi…
- Form 1084 — Fannie Mae’s self-employed income analysis worksheet. Lenders use it to standardize how they calculate qualify…
- 2-year average — How conventional lenders handle self-employed income variability: they average qualifying income across the tw…
- Depreciation add-back — Depreciation is a non-cash expense — it reduces Schedule C net income without representing real money leaving…
← Back to the full mortgage glossary
Sources
Educational definition only — not financial, legal, or tax advice. Programs and limits change; verify current terms with a licensed professional.