Freddie Mac Form 91 | Fillable PDF

As a self-employed individual, lenders see you as a riskier investment who’s more likely to default on a loan. In addition to reviewing your individual and business tax returns, lenders will use Freddie Mac Form 91 or an equivalent form to determine your qualifying monthly income towards obtaining a loan.

In determining your worth as a borrower, the lender will consider a number of factors:

• Nature of and demand for your business
• Stability of your income
• Financial security of the business
• Future ability of business to generate income

Similar to an IRS form, Form 91 provides a line item structure for you to input many profit and loss figures indicating sole proprietorship income, capital gains, partnership income, and several other forms of self-employment monetary loss and gain.

Each figure can be taken from the IRS forms you file: Forms 1040, Schedule C, Form 2106, Form 6252, Form 1065 (Partnership Income), and Form 1120s (S-Corporation).

Various sources of your income will not be documented with Form 91, including W-2 income that is not from self-employment, dividend and interest income, alimony, pensions, IRAs, trusts, and Social Security and unemployment income. For many lenders, you will have to present two years of steady self-employed income, which the lender will divide into a monthly average, to pass the underwriting process.

Depreciation, depletion, and amortization will go toward your final adjusted gross income to determine overall qualifying income. Thus, it’s critical to make sure your initial tax assessments are accurate and account for each of these exactly so that you can increase you qualifying income as much as possible.

One important aspect the lender will note is whether there has been a significant increase or decrease in your income over the two-year period. If there has been a steep drop, for example, this could show a greater likelihood that you will default. In these cases, the lender may need extra justification and documentation showing that your income will remain adequate to support paying the debt.

When including any self-employed income from an S-Corporation, the lender would be careful to check the borrower’s ownership interest in the company and ensure that the company has consistently earned enough money to support the borrower’s payment of the debt. The corporate resolution and its business tax returns could be sufficient to do so.

The lender may also judge the financial strength of the company by comparison to its competition’s performance. This will include determinations of the business’s yearly gross income, expenses, taxable income, and then an analysis of the trends in the changes of these figures over time.