How many years of income do lenders typically consider for self-employed individuals?

Lenders typically consider the income of self-employed individuals over a span of two years. This approach allows lenders to assess the consistency and stability of a self-employed borrower's earnings, which can fluctuate significantly based on market conditions, business successes, or downturns. Two years of income documentation provides a more reliable picture of an applicant's earning potential and financial health.

Using a longer timeframe, like three or five years, while it may provide even more context on the income trends, is less common in standard lending practices for most situations, as lenders prioritize timely and relevant data about financial stability. Furthermore, basing assessments on just one year can be misleading, particularly for self-employed individuals who might experience irregular income due to the nature of their work. Thus, the two-year period strikes a balance that lenders find acceptable for evaluating self-employed borrowers.