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For self-employed people, what income do banks use to determine mortgage eligibility?

Is it AGI, or Net Profit from my business? My Net Profit is $28,101, but my AGI is $23,465 because of a one-time loss from sale of stock. 

I've gotten different answers from different people on this, and I'm confused. 

FYI, I'm looking to buy a townhome for approximately 150K, and I'd be putting at least $30K down, so the mortgage would be for no more than $120K. My credit score is 752 and I have no other debts other than my credit cards which I pay off in full every month.
  • April 14 2012 - US
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Answers (2)

Banks will also generally look for at least 2 years' worth of self-employment income.
  • April 17 2012
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Net Profit, Line 12 of 1040.   Add back in depreciation and depletion Lines 12-13 of Schedule C, subtract line 24b meals and entertainment.
  • April 14 2012
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