What type of documentation is typically required for self-employed borrowers to provide proof of income?

For self-employed borrowers, the most common requirement is to provide tax returns for the last two years. This documentation serves to validate the borrower's income through official reporting to tax authorities and offers a clear view of their earnings over a defined period. Lenders look for consistency in income and tax documentation, which helps them assess the borrower's financial stability and ability to repay the mortgage.

While other documents, such as profit and loss statements and business licenses, may come into play to supplement the tax returns, the primary requirement is usually the two years of tax returns. This provides a solid foundation for lenders to evaluate income adequately. Typically, looking back eight years would be excessive for most lending processes, as lenders focus on the most recent performance to gauge current and future loan repayment capabilities.