K1 or self-employed income is typically issued to a partner or owner of a company. Much like the 1099 income, K1 income is equally if not more involved. Again, there is gray area here as well, but if you own 25% or more of a company you will likely fall in the self-employed bucket, which brings rules of its own. Commonly, lenders require a two year history of self-employed income and are required to analyze both business and personal returns in order to average the income and determine if it’s likely to continue at the qualifying rate. If you are self-employed, then you should plan on providing more paperwork to your lender to include personal and business tax returns, profit-and-loss statements, and balance sheets.
