Underwriter's Perspective for Self-Employed

[Dwight Sands]

I'm working on some calculations for current and projected (next year) DTI ratio to see where I need to be for financing. I'm self-employed (for 2+ years) and as I understand it a lender will use the 2 most recent tax returns and take the average to calculate income. If so, which values? Adjusted Gross Income or Taxable Income?

Also, what are some opinions on refiling returns to show less deductions in the form of losses, expenses, etc. and paying the tax difference in exchange for more buying power?

[Jesse Gonzalez]

@Dwight Sands 

 There's a common misconception that self employed borrower's must provide two years tax returns when qualifying for a mortgage.  Many times I run the borrower's information through fannie or freddie's automated underwriting engine and it only requires us to provide the most recent year's tax returns, all schedules associated.   This is something that can be done prior to you filing to see what the system requires for your financing to go through.  As far as your other question is concerned, I'll say that if you found a discrepancy on your tax returns and filed an amended return there is nothing wrong with that on the lending side.  I would first have your loan run through DU or LP to find out what the findings state for documentation requirements.