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How do lenders calculate DTI for self-employed buyers?
I’ve noticed a lot of confusion among self-employed buyers about how lenders calculate their income for DTI purposes. Unlike W-2 employees, self-employed borrowers often face stricter scrutiny. Lenders typically use a 2-year average of net income (after deductions) from tax returns, which can be much lower than gross revenue.
For those who have gone through this: what was your experience? Did you have to provide additional documentation (like bank statements or profit & loss statements)? And how did it affect your pre-approval amount?
If you want to calculate your exact DTI and see how lenders will view your income, I built a free, privacy-first calculator that runs 100% in your browser (no sign-up, no data tracking). You can check it out here: https://smartmortgagecalc.space/true-cost
smartmortgagecalc.space
True Cost of Homeownership Calculator (PITI & HOA)
Calculate your total cost of homeownership beyond the mortgage payment, including property taxes, HOA dues, home insurance, maintenance, and PMI.
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