How to Use Income Tax Records to Get a Home Loan

Buying a new home is stressful, but even more stressful for the self-employed.
i Thinkstock/Comstock/Getty Images

Lenders not only look at your credit score when deciding whether you qualify for a home loan -- they also look at your income. Lenders typically request copies of your paystubs or W-2s to prove your income, but the self-employed have a difficult time proving they're income-worthy. Self-employed borrowers don't get a paycheck, so providing lenders with a copy of your income tax records is the only way to get a loan. Your tax forms include your adjusted gross income, which your lender uses to figure whether you can afford a home loan.

Step 1

Grab copies of your last two years income tax returns. If you don't have the returns and self-prepared your taxes, you can print a copy of each using the program you used to file your return. If you paid someone else to prepare your taxes, ask for a copy of each return from the tax preparation business. If you've exhausted both avenues and still can't find your tax return, order a tax transcript from the Internal Revenue Service website.

Step 2

Fill out the mortgage loan application with the lender. Use your adjusted gross income listed on Form 1040 to report your income.

Step 3

Provide both copies of your tax returns to the lender. Some lenders will also ask that you sign a form that gives the lender permission to order a tax transcript from the IRS. This is just their way of insuring the information on your return is accurate.

Step 4

Calculate your debt-to-income ratio with the lender. Your debt-to-income ratio is your monthly debt, including credit card minimum payments, car loans, student loans and mortgage payments, divided by your average monthly income. According to, your debt-to-income ratio shouldn’t be higher than 36 percent, but some federal lenders accept a ratio of as high as 41 percent.

the nest