Guideline answers · Fannie Mae

Fannie Mae · Income

Can a self-employed borrower qualify with one year of tax returns on a Fannie Mae loan?

Two different rules. Less than two years in business can work if the latest signed returns show a full 12 months from the current business and the borrower earned the same or more in the same field before. One year of personal and business returns is allowed only when the business has existed five years and the borrower has owned 25% or more for five years in a row.

Checked against the sources below on October 29, 2026. Reviewed by Chris Black, NMLS 275073, on November 2, 2026.

The rules

• Standard: a two-year history of self-employment earnings, with two years of signed federal returns or IRS transcripts.
• Less than two years: the most recent signed personal and business returns must show a full year (12 months) of income from the current business.
• And the file must show prior income at the same or greater level, in a field with the same products or services, or in a job with similar responsibilities.
• One year of returns: the business has existed five years per the Form 1003, and the borrower has held 25% or more for the past five years consecutively.
• Business returns (or, for a sole proprietor, the individual return) must support the Form 1003. Each business is tested separately.
• A Form 1084 or equivalent cash flow analysis goes in the file.
• Business returns can be waived with two years of personal returns when the borrower uses personal funds for closing and reserves, has been in the same business five years, and income increased over the two years.

Watch for

• This section is numbered B3-3.5-01 in the current Guide.
• The Guide grants the one-year option to the lender when the tests are met. Your lender or DU findings may still ask for two years.

Sources