The Quick Read: Usually, yes. Two years of personal and business income documentation is the standard documentation a self-employed homeowner brings to a jumbo cash-out refinance. Having the returns is not the test, though. The test is how much qualifying income the underwriter can document after the tax-return adjustments, and whether that income supports the loan alongside your equity, credit, and reserves. Every figure here is subject to lender guidelines and full file review, and nothing is a commitment to lend.
What Does “Two Years of Returns” Actually Mean?
It means two consecutive years of signed personal returns, with all schedules, plus business returns when you own enough of the company. Most underwriters read this as proof of a pattern, not a single good year.
Under the agency framework that most jumbo lenders borrow from, Fannie Mae’s Selling Guide generally calls for a two-year history of earnings. Fannie Mae treats anyone owning 25% or more of a business as self-employed. If you hold a partnership or S-corporation stake, expect the lender to ask for those business returns and your K-1s too. IRS transcripts can often stand in for copies of the returns.
One distinction trips people up. Two years of returns and two years in business are not always the same thing. A lender looks at both. A business that is eight years old with two clean returns is a different file from a business that launched fourteen months ago.
Why Is a Jumbo Cash-Out Judged Differently?
A jumbo loan sits above the county’s conforming limit, so Fannie Mae and Freddie Mac cannot buy it. Each wholesale investor writes its own guidelines. The agency rules become a reference point, not the law of the loan.
The limit itself moves every year. FHFA’s published methodology sets a national baseline, and high-cost counties get a higher ceiling. Check your own county’s figure before assuming where “jumbo” starts for you.
Here is what the wholesale jumbo lanes look like from a broker’s desk. Across the programs Lendmire places files with, the headline lane uses a 660 decision score. Leverage reaches 90% on that lane, though cash-out refinances sit at lower leverage than purchases, and several lanes top out at 80%. Loans run to $5,000,000 on the largest lanes, and the largest ones also put a cash cap on how much you can take out. The ratio ceiling is 50% on the fixed lanes, 45% on the adjustable lane, and 43% on the interest-only lane. Reserves are counted in months of the full payment and grow with the loan amount. Above a lane’s threshold amount, expect two appraisals.
That is the envelope. Lendmire’s jumbo cash-out refinance program page lays out the lanes in more detail.
How a Lender Turns Two Returns Into Qualifying Income
Lenders convert your returns into a monthly income figure using a written cash-flow analysis. Fannie Mae’s version is Form 1084, and jumbo lenders use equivalents built on the same principles. The goal is stable, continuing income available to you, not what your business took in.
Walk through it in plain terms:
1. The underwriter starts with the net profit that shows up on the returns, after your deductions.
2. Certain non-cash expenses may be added back, since they did not drain your bank account.
3. The result for each year is compared. Rising or flat income is usually averaged across the two years.
4. A decline gets closer scrutiny. The lender may use the lower figure, or ask you to explain the drop.
5. That monthly figure becomes the denominator for your debt-to-income ratio.
Here’s the catch. Heavy write-offs lower the very number the lender is trying to measure. Gross sales and bank deposits are not your income here. Tax-return profit is.
A quick picture, no dollar figures needed. Say one owner’s income rose each year, a second owner’s stayed flat, and a third owner’s fell in year two. The first usually has the cleanest file. The second is straightforward. The third faces a harder conversation, and the lender may ask for a year-to-date profit-and-loss statement to show the business is stable. Under the agency framework a year-to-date P&L is not required for most businesses, but a lender may ask for one if your application falls well past your tax year-end.
Which Business Structure Do You Have?
Your entity type changes which documents show up in the file.
| Structure | Typical documents | What the lender reads |
|---|---|---|
| Sole proprietor | Personal returns, Schedule C | Net profit after deductions |
| S-corporation | Personal returns, 1120S, K-1 | Wages plus K-1 income |
| Partnership | Personal returns, 1065, K-1 | K-1 income and distributions |
For K-1 owners, the agency guide calls for two years of business returns unless a waiver applies. A history of steady cash distributions that matches the income used can reduce the need for extra proof that you can access the business’s money. Your lender decides what applies on a jumbo file.
Does Two Years of Returns Qualify You? A Decision Table
It depends on what the numbers show, not on the count of returns. This table maps common situations to the usual direction.
| Your situation | Two-year returns usually fit? | Consider instead |
|---|---|---|
| Income rising, moderate write-offs | Yes | Standard full-documentation path |
| Income flat, debts modest | Usually | Standard path, strong reserves help |
| Income fell in year two | Maybe | Explanation letter, or wait a year |
| Returns understate real cash flow | Often not | Ask your broker about alternative documentation |
| Business under two years old | Rarely | See exceptions below |
The alternative documentation route exists, but it works differently and is priced and structured differently, and availability varies by lender and loan size. A broker can tell you what is open at your amount.
What If You Fall Short of Two Years?
The agency framework allows some exceptions, and many jumbo lenders borrow them. If you have under two years of self-employment, the most recent signed returns generally must show a full 12 months of income from the current business. The file must also support prior income at the same level or higher.
Going the other way, Fannie Mae’s announcement permits one year of returns only when your self-employed businesses have existed five years and you’ve held at least 25% ownership for five consecutive years. With two years of signed personal returns, a lender may also waive business returns when you meet three tests: personal funds cover the down payment, closing costs, and reserves; you have been in the same business at least five years; and your personal returns show rising self-employment income.
These are agency rules. A jumbo lender may be stricter. Treat them as a map of what is possible, not a promise.
What About the Cash-Out Part?
The cash-out side adds its own checks. Agency-style rules typically ask that your existing first mortgage be at least 12 months old and that you have been on title for six months. A home recently listed for sale usually has to come off the market first. Jumbo investors set their own seasoning and reserve requirements, so use those as typical, not fixed.
Occupancy matters too. Primary residences get the most favorable leverage. Second homes and investment occupancy run at lane-specific leverage, so tell your broker how you use the property up front.
The appraisal caps everything. Appraised value sets your loan-to-value ratio, and no program lets you turn 100% of your equity into cash. On a large cash-out you may also face a second appraisal and a cash cap.
Think about what the money is for, too. The CFPB’s research found paying off other debts was the most common stated reason for a cash-out refinance, with home repairs second. Federal guidance cautions that paying non-mortgage debt with mortgage debt can raise foreclosure risk. A cash-out also resets your loan terms and can lengthen your payoff timeline.
What Experienced Brokers See on These Files
Here’s the pattern. Self-employed jumbo files rarely fail on credit or equity. They fail on the income line. An owner who wrote off aggressively for good tax reasons finds the lender’s income number lower than expected, the ratio climbs toward the program ceiling, and the cash-out amount shrinks to fit.
A broker who runs the income math before you apply can show you the gap early. Sometimes the answer is a smaller cash-out. Sometimes it is waiting for a stronger third return. Sometimes it is a different lane. This one’s a genuine judgment call, and it depends on your numbers.
Tax Planning and Your CPA
Tax treatment can depend on your situation; borrowers should speak with a qualified tax professional before relying on any deduction or credit. One practical point: talk to your CPA before you apply, not mid-process. Changing how you report income while a file is open can raise questions. For general tax information, the IRS is the place to start.
Document Checklist
- Two years of signed personal returns, all schedules.
- Two years of business returns if you own 25% or more of a partnership or S-corp.
- Year-to-date profit-and-loss statement, if the lender requests it.
- Recent bank statements for funds and reserves.
- Mortgage statement and homeowners insurance for the current property.
- A short explanation letter if income dipped in either year.
Key Terms Defined
Qualifying income: The monthly income figure a lender calculates from your returns, which can differ from what your business earned.
Debt-to-income ratio (DTI): Your monthly debts divided by your qualifying monthly income.
Reserves: Cash or liquid assets left over after closing, counted in months of your full housing payment.
K-1: The tax form that reports your share of a partnership or S-corporation’s income.
Cash-out refinance: A new, larger mortgage that pays off your current loan and gives you the difference in cash.
Seasoning: How long you have owned the home or held the current loan.
Frequently Asked Questions
Can I use a jumbo cash-out if my business is less than two years old?
Rarely on standard documentation. The agency framework allows an exception when your latest returns show a full 12 months of income from the current business and your prior income supports the same level or higher. Lender guidelines vary, and a broker can tell you which lanes accept it.
Does a down year ruin my chances?
Not automatically, but it can lower your qualifying income. Lenders may use the lower figure or ask for a written explanation and a year-to-date P&L showing recovery. If the drop was a one-time event, documenting that helps. If it is a trend, waiting for a stronger return may serve you better.
Are gross sales or bank deposits counted as my income?
No. Under the agency approach, the underwriter analyzes cash flow from your returns, not gross receipts. Federal rules also require verified income, so stated income without documentation is no longer an option.
Can I take out all of my equity?
No. The appraisal sets your loan-to-value ratio, and cash-out leverage sits lower than purchase leverage on these programs. The largest lanes also put a cash cap on what you can take out.
Do Fannie Mae rules apply to my jumbo loan?
Not directly, since those loans are outside what Fannie Mae can buy. Jumbo lenders often borrow its self-employed framework as a reference, but each sets its own terms.
If you are weighing a cash-out refinance against keeping the loan you have, Lendmire can help you compare the programs and the equity each one reaches. A related read: Lendmire’s piece Jumbo Cash-Out vs. Bank Statement for an Owner With Two Years of Returns covers the alternative path in more depth.
For your own numbers, request a scenario review with Lendmire.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges FHA, VA, conventional and jumbo home purchase and refinance financing in 16 states through wholesale lenders. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Fannie Mae Selling Guide: Underwriting Factors and Documentation for a Self-Employed Borrower
2. FHFA: Conforming Loan Limit Addendum
3. Fannie Mae Selling Guide announcement on one-year returns
4. CFPB: CFPB Report Finds Cash Out Mortgage Refinance Borrowers Improve Credit Scores
5. IRS
This article is part of Lendmire’s Jumbo Loans series — every loan program’s qualification details, guidelines, and scenarios live on the loan options page.
Related reading: Should a Condo or Co-Op Owner Fund a Remodel With a Jumbo Cash-Out? · Can a Trust With a Co-Trustee Get a Jumbo Cash-Out? · How to Size a Jumbo Cash-Out on a Texas Homestead
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Required disclosures. Lendmire (NMLS# 2371349) operates as a licensed mortgage broker, not a direct lender or depository. The discussion in this article is general in nature and should not be relied upon as financial, legal, or tax advice — every investment scenario is unique and should be reviewed by a qualified professional. Any loan inquiry is subject to lender underwriting, and this article is not a commitment to lend or a guarantee of approval. Mortgage rates, loan terms, and program guidelines vary by borrower, property, and state, and may change without notice. Equal Housing Opportunity. Verify licensure at NMLS Consumer Access.