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Ask The Experts: Question of the Week

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Freddie Mac – Self-Employed Borrower – LPA Requirements


My client is self-employed and is paid W-2, and we need to use the one-year of income (2022) to qualify. LPA came back with one year required. Will the underwriter require the 2021 W2 and Tax Returns?


Of course, every loan may have specific loan level requirements that only a lender/underwriter can determine is necessary to them……. but generally speaking, if the Automated Underwriting system from LPA or DU only requires one-year returns, then that is all that should be required.

If, for some reason, the DU or LPA feedback certificate is also asking for two years W2’s then that is a different situation, and again, a lender can never require less than what DU or LPA is requiring, but they can request more.

There is no specific requirement that I can point you to within the selling guides that says a borrower must prove they received W2 wages for two years in a row when self-employed. Typically, a lender will only require what DU or LPA will require for documenting the income, and for self-employed borrowers, that is typically one or two years of returns.

If you are getting a one-year return option, the lender must validate that the business has been in existence for 5 years, which is typically done with the business tax returns showing ‘date established’ or ‘in business since.’


Freddie Mac Section 5304.1 – Stable monthly income and documentation requirements for self-employed Borrowers