Entrepreneurs and 1099 contractors who maximize legal tax deductions often show lower adjusted gross income (AGI) on Form 1040, complicating traditional Fannie Mae underwriting.
1. Traditional vs. Bank Statement Refinance Underwriting
| Underwriting Feature | Fannie Mae Conventional (W-2 / 1040) | Non-QM Bank Statement Refinance |
|---|---|---|
| Income Verification | 2 Years of Signed IRS Form 1040 Tax Returns | 12 to 24 Months of Business Bank Statements |
| Depreciation & Write-Offs | Tax deductions reduce qualifying borrowing power | Gross business deposits analyzed via standard expense factor |
| Minimum Credit Score | 620 FICO | 660 FICO |
| Maximum Loan Amount | Conforming limits ($766,550+) | Up to $3,500,000+ |