Proof of steady income for the self-employed can be more complicated, but you can still qualify if you provide the right documentation. Be prepared: Your loan officer will be much more thorough in examining your documentation.
The FHA does not require professionally prepared business reports. However, having a pro look at your income and profit and loss (P/L) statement is money well spent. If you use a certified public accountant (CPA), the CPA can strengthen your application by providing a letter stating he has first-hand knowledge that you have worked for two years in the same or a similar enterprise.
Make sure you address any outstanding credit issues, disputes with vendors or tax problems before submitting an FHA loan application. The bottom line for the self-employed: Make your paperwork rock-solid. As a small-business person or independent contractor, you will need to show not only that you have had steady employment but also that you have sufficient net income after expenses. Documentation if you are self-employed includes:
Business income statements for the previous two years.
Profit and loss statements for the past two years.
IRS Form 1040, including Schedule C (business income and loss) and, if they apply, Schedules B (interest and dividend income), D (capital gain and loss), E (rents, royalties, partnerships) and F (farm income and loss).
If you are incorporated, submit IRS Form 1120.
If you use a CPA, ask for a verification of employment letter stating that the CPA has first-hand knowledge that you’ve worked for two years in the same or a similar enterprise.