The number a lender actually uses isn’t your gross or your net — it’s a specific cash-flow calculation. Enter your tax-return figures and see your qualifying income the way an underwriter computes it with Fannie Mae Form 1084.
≈ $88,750 per year
Illustrative approximation of Fannie Mae Form 1084. Your lender runs the actual worksheet. Not a pre-approval, quote, or financial advice.
Most recent year, line by line:
When you’re a W-2 employee, qualifying income is easy: it’s the number on your pay stub. When you’re self-employed, it’s a calculation — and one most borrowers have never seen. Lenders run a standardized cash-flow worksheet (Fannie Mae’s Form 1084, Freddie Mac’s Form 91) that starts from your tax-return net income and adjusts it:
For an S-corp or partnership, the worksheet runs on the business return and is multiplied by your ownership percentage, then your W-2 wages (S-corp) or guaranteed payments (partnership) are added on top at 100%. Switch the business type above to see how each is handled. Lenders also verify business liquidity (a current or quick ratio of at least 1.0) before counting K-1 income — something this tool flags but can’t compute from these inputs alone.
Once you know your qualifying income, run it through the affordability calculator to see your maximum home price, or see how much an extra write-off would cost you with the write-off vs. approval simulator.
Lenders don't use your gross revenue or even your net profit directly. They run a cash-flow analysis (Fannie Mae Form 1084 / Freddie Mac Form 91): they start from net profit, add back non-cash deductions like depreciation, depletion, amortization, and business-use-of-home, subtract one-time income and the meals exclusion, then average the result over two years. The figure that comes out is your 'qualifying income' — what the debt-to-income ratio is built on.
The big ones are depreciation (Schedule C Line 13), depletion (Line 12), the business-use-of-home deduction (Line 30 / Form 8829), and amortization. These reduced your taxable income but didn't cost you cash this year, so the lender adds them back. Documented one-time losses are also added back. This is why a borrower with heavy depreciation can qualify on far more than their tax-return net income suggests.
Usually, yes — if your income is stable or rising, they average the two most recent years. The important exception: if your most recent year is lower than the prior year, lenders generally use the lower (most recent) year instead of the average, and may ask for a written explanation. This calculator applies that rule automatically.
A year-over-year decline is the single biggest self-employed underwriting risk. Lenders treat it conservatively: they qualify you on the lower, most-recent year — not the two-year average — and a significant drop typically needs an explanation. A current year-to-date profit-and-loss statement showing recovery can help offset it.
Because tax-return-based qualifying income is your net profit (plus add-backs), not your revenue. Every legitimate write-off lowers it. If write-offs have suppressed your net income, a bank-statement loan — which qualifies on deposits instead of tax returns — can show a much higher number. Compare the two with the bank statement income estimator.