Approved for a mortgage but

[1prettyorchid]

Hello,

I was approved for a mortgage with a middle score of 679 and I was approved for $175k. I decided not to move forward because realistically I cannot find anything in my area for that amount. My job pays me about $58k a year and my business brings in the same amount. However, in 2024, I reported a loss on my tax return and this year I report a profit of $1500. Next year, I plan to show a profit of about $30,000. I understand this will be calculated at an average. 

My question is, will this give me a burst of income? I also plan to plan to pay down some debt as well. I'm just trying to put myself in the best possible situation. I am fairly new to being self employed. 

[ShanetheMortgageMan]

Yes, when self-employment income is increasing then the two years are averaged to determine the amount of qualifying income from it.  

If you've been self-employed for at least 5 years then with conventional financing you can just use the most recent tax return, rather than averaging the last 2.  

There are also alternative income documentation programs for self-employed people, such as using deposits on bank statements to calculate your income or a CPA prepared P&L.  The terms for those options aren't as good as if you can just qualify with your tax returns though.