Qualifying self-employed borrowers can be one of the hardest parts of mortgage lending. If income is calculated incorrectly, it can lead to delays, loan defects, and unhappy borrowers.
Fannie Mae’s Form 1084 helps underwriters avoid these problems. It gives a clear, consistent way to review tax returns and calculate reliable self-employment income.
This guide explains how Form 1084 works and why every underwriter needs to understand it.
Main takeaways from this article:
- Form 1084 is the worksheet underwriters use to figure out stable income for self-employed borrowers.
- To complete it correctly, underwriters need full tax returns, K-1s, and all related schedules.
- The form focuses on steady, recurring income and removes one-time or non-cash items.
- Each business must be reviewed on its own to avoid mistakes.
- IncomeXpert can automate these steps and help underwriters stay accurate and consistent.
What Form 1084 does and why it matters
Form 1084 helps underwriters figure out steady, reliable income for self-employed borrowers. It gives a clear way to review tax returns and decide what income can safely be used for a mortgage.
The form, also known as the FNMA 1084, shows how to adjust the numbers, like adding back non-cash expenses and removing one-time income, so the results follow Fannie Mae’s rules.
Doing Form 1084 correctly is important because mistakes can cause loan delays, loan defects, errors, or repurchase risk.
Who uses Form 1084 and why?
Several mortgage professionals use Form 1084 to make sure a self-employed borrower’s income is calculated correctly.
Lenders and underwriters
They fill out Form 1084 to find the self-employed borrowers’ qualifying income. The form helps them review cash flow, make the right adjustments, and follow Fannie Mae’s rules.
Loan officers and processors
They collect and check the income documents before the file goes to underwriting. This helps prevent delays and makes sure all numbers are complete and accurate.
Did you know? Each business entity or income stream requires a separate 1084 worksheet. This is especially important for borrowers with multiple businesses or rental properties. |
Documentation required before completing Form 1084
Before filling out Form 1084, underwriters must collect all tax documents related to the borrower’s personal and business income.
Required documentation includes:
- Personal tax returns (IRS Form 1040) with all schedules
- Business tax returns (Form 1120 for corporations, 1120S for S corps, 1065 for partnerships)
- K-1s for partnership and S corporation income
- Schedule C for sole proprietorships
- Schedule E for rental income
- Year-to-date profit and loss statements, if needed
Each business must be reviewed separately, with its own financial documents and worksheet. Underwriters also need to check the ownership percentage and make sure the income is consistent across years.
Tip for readers: Fannie Mae’s Selling Guide explains exactly which documents are required for self-employment income. Using this guidance helps ensure the 1084 is completed correctly and meets compliance standards
Learn more about underwriting income rulesSelf-employment income is only one part of a much larger underwriting framework. If your team needs a broader refresher on income rules, edge cases, or guideline interpretation, this resource can help. |
How to treat each business type under the 1084
Different types of businesses must be reviewed in different ways on Form 1084. Each one has its own rules and adjustments.
- Sole proprietorships (Schedule C): Use the income shown on Schedule C from the borrower’s tax return. Add back non-cash expenses like depreciation. Look at two years of gross receipts and net profit to spot trends.
- Partnerships and S corporations (K-1 income): Check the K-1 to confirm how much of the business the borrower owns. Income can only be used if the borrower owns 25% or more. Add back non-cash expenses from the business return as needed.
- Corporations (1120 filers): For C corporations, use only the borrower’s W-2 wages or dividends. Do not use the corporation’s net profit unless the borrower has a history of receiving distributions.
Because each business type works differently, underwriters must apply the correct rules every time to stay compliant.
How to complete Form 1084 step-by-step
Use these steps to review tax returns, make the right adjustments, and calculate qualifying self-employed income in a clear, consistent way.
1. Collect and organize tax forms
Start by gathering all of the borrower’s tax documents. These may include:
- Form 1040: Personal tax return showing total income, deductions, and credits
- Schedule B: Shows interest and dividend income
- Schedule C: Shows profit or loss from a sole proprietorship
- Schedule E: Shows rental income and income from partnerships, S corporations, estates, and trusts
- Schedule K-1 (from Forms 1065 or 1120S): Shows each owner’s share of income, deductions, and credits
- Form 1099: Shows income paid to independent contractors or freelancers
Some lenders may require extra forms, but these are the most common starting point.
2. Identify income sources by business type
Next, review the tax returns to see where the income is coming from.
- Look at Schedule C for sole proprietor income
- Look at Schedule E for rental income and certain pass-through income
- Look at K-1 forms for partnership or S corporation income
Identifying each income type correctly helps you complete Form 1084 without mixing sources.
3. Apply income adjustments correctly
Use the self-employed income analysis worksheet or 1084 structure to adjust the raw numbers.
Typical adjustments include:
- Add back depreciation and amortization (non-cash expenses)
- Remove one-time gains or losses that are not likely to happen again
- Adjust for self-employment taxes when needed
- Apply rental income rules according to Fannie Mae’s rental income guidance
These adjustments help you focus on income that is truly ongoing and reliable.
4. Calculate qualifying income
Once you’ve made the adjustments, use Form 1084 to convert the adjusted income into qualifying income.
- Enter the adjusted numbers in the correct lines for business income, depreciation, amortization, and nonrecurring items
- Focus on income that is recurring and likely to continue
- Keep nonrecurring items separate so they don’t inflate the final income
After all deductions and adjustments, the worksheet will show the net cash flow you can use as qualifying income for the mortgage.
5. Validate accuracy before submission
Before you finalize the form, double-check everything:
- Compare every line on Form 1084 to the tax returns and supporting schedules
- Recalculate totals and subtotals to confirm the math
- Make sure income numbers match across all forms
- Confirm that your adjustments follow Fannie Mae’s rules
- Verify that every income figure is supported by proper documentation
This final review helps prevent mistakes that could lead to loan defects or repurchase risk.
Seven best practices to avoid defects and QC findings
These tips can help underwriters complete Form 1084 more accurately and prevent mistakes that lead to loan defects.
1. Use separate 1084s for each business
Always complete a separate Form 1084 for every business or income source the borrower owns. This keeps income streams from being mixed together and makes it easier to see trends and stability. Fannie Mae and Freddie Mac require each business to be reviewed on its own.
2. Use SAM (Schedule Analysis Method)
The Schedule Analysis Method (SAM) is the preferred way to calculate self-employed income. It is simpler and more accurate than the older AGI method.
SAM focuses only on the income that matters for qualifying, which helps reduce errors and save time.
Industry groups like MGIC also recommend using a structured cash-flow method with clear add-backs—this supports Fannie Mae’s move toward standardized analysis.
3. Correctly classify recurring vs. nonrecurring income
- Recurring income is income that happens regularly and is expected to continue.
- Nonrecurring income happens only once or irregularly (such as a one-time contract, property sale, or unusual bonus).
Classifying income correctly helps prevent inflated qualifying income.
4. Verify EINs for self-employment wages
Check that the Employer Identification Number (EIN) on the tax returns matches the business providing the income. This confirms the income is legitimate and helps prevent errors or misrepresentations.
5. Calculate rental and investment income properly
Make sure rental and investment income reflect net income—what is left after normal expenses. Rental income should account for operating expenses, and investment income should consider typical management or maintenance costs.
6. Avoid double-counting pass-through income
Never count partnership or S corporation distributions twice. If distributions are already included in Schedule C or the business tax return, listing them again will inflate income and can be viewed as inaccurate or misleading. Keep clear records to avoid this mistake.
7. Use automation to reduce manual risks
Manually filling out Form 1084 takes time and increases the chance of error. Even tools like the Fannie Mae Income Calculator still require manual data entry, which can lead to inconsistencies.
Automation tools like IncomeXpert help standardize calculations, apply guideline rules correctly, and reduce mistakes across underwriting teams.
See how Blueprint handles self-employed incomeIf you’re comparing tools or updating your income analysis workflow, Blueprint provides a deeper look at how automated 1084 logic works across business types, tax forms, and trending scenarios. |
Real-world 1084 calculation examples
These examples show how different business types and income situations turn into qualifying income on Form 1084.
- Example 1: Schedule C Business: A sole proprietor reports $60,000 in net profit and $5,000 in depreciation. Because depreciation is a non-cash expense, it is added back, giving $65,000 qualifying income. If last year’s income was $62,000, the underwriter would use the average unless the current year is lower.
- Example 2: Partnership Income: A borrower owns 30% of a partnership and has $20,000 in ordinary income. They also receive $5,000 in guaranteed payments, and the business return shows $2,000 in depreciation. Only the borrower’s share is used in the income calculation.
- Example 3: S Corporation: A borrower earns $50,000 in W-2 wages from their S corporation. Their K-1 shows $15,000 in pass-through income and $3,000 in depreciation. The qualifying income combines wages with the adjusted pass-through amount.
- Example 4: Declining Income: A business earned $80,000 in Year 1 and $60,000 in Year 2. Because the income is declining, the underwriter must use the lower amount and document the reason for the drop.
Streamline your 1084 process with IncomeXpertStop spending hours on manual worksheets. IncomeXpert applies Fannie Mae’s 1084 logic accurately and automatically, helping your team reduce errors and stay compliant. |
Simplify your 1084 workflow with IncomeXpert
Form 1084 can be hard to complete because it requires checking many tax forms and doing detailed math. IncomeXpert makes this easier by pulling in tax data automatically, following Fannie Mae’s rules, and creating clear income worksheets for every business type.
It works with both manual and automated workflows, giving underwriters a clear view of all calculations. With less manual data entry, teams can review complex income files faster and more accurately.
To see how IncomeXpert can modernize your income analysis process, request a demo.
FAQs about Fannie Mae Form 1084
What is Fannie Form 1084?
Form 1084 is a worksheet that helps underwriters calculate steady, qualifying income from self-employment, partnerships, S corporations, and rental properties.
How is self-employment income calculated for a mortgage?
Lenders look at tax returns, add back non-cash expenses like depreciation, remove one-time income, and average one or two years of earnings. They also check that the income is stable and likely to continue. Tools like IncomeXpert help apply these rules correctly.
What is the 5% rule for Fannie Mae?
If a borrower’s self-employment income drops by 5% or more from one year to the next, the underwriter must find out why. A big decline may mean using the lower income amount or needing more documentation before the borrower can qualify.