Can K-1 Income Qualify for a Florida Mortgage Under 25% Ownership?

Yes, it may. If you own less than 25% of a partnership, S corporation, or LLC, K-1 income may help you qualify for a Florida mortgage under current Fannie Mae guidance. The K-1 alone is not enough.

The lender must verify that you received the income or that the business has enough liquidity to support a withdrawal. You also need the required income history and documents.

This guide covers the Fannie Mae conventional rule for this ownership range. Other lenders, loan programs, and loan types may use different rules.

Why the ownership percentage matters

Fannie Mae uses a separate rule for borrowers who own less than 25% of a partnership, S corporation, or limited liability company. Borrowers with more than 25% ownership follow the self-employed income rules instead.

The guide does not state that an exact 25% ownership interest qualifies for the under-25% rule. Ask the lender to review your ownership documents before you rely on the income.

Ownership matters because it can affect your access to business cash. The lender must decide whether the income on your tax return is available for your mortgage payment.

What Fannie Mae requires

Fannie Mae's Schedule K-1 rule was updated October 7, 2026. It requires a minimum two-year income history for this category.

The lender must document one of these conditions:

• You received the income, and the distributions match the business income used to qualify.
• The business has enough liquidity to support a withdrawal of earnings.

The lender may use your proportionate share of earnings shown on the K-1. Under this rule, the lender does not need to complete the full business-viability review used for self-employed borrowers.

That does not mean approval is automatic. Your credit, debts, assets, property, and loan program still matter.

A K-1 is not the same as cash received

A Schedule K-1 reports your share of business income and other tax items. The business may report income to you even when it keeps the cash.

For example, a K-1 may show $40,000 of income. You may have received less than $40,000 in distributions.

The business may have kept the money for payroll, inventory, debt, or future work. The lender must review the distributions or the business liquidity before using the income.

Your CPA can explain the tax return. The lender decides how the income fits the mortgage rules.

Documents the lender may need

For the under-25% K-1 category, Fannie Mae requires the most recent two years of signed personal federal tax returns and Schedule K-1 forms. A verbal verification of employment is also required in most cases.

If the K-1 reports only rental income, Fannie Mae requires one year of signed personal federal tax returns and the K-1. A verbal employment verification is not required in that rental-only case.

• Two years of signed personal federal tax returns.
• Two years of Schedule K-1 forms.
• Records showing distributions you received, when needed.
• Business records showing available liquidity, when needed.
• A partnership agreement or operating agreement, when ownership or payments need support.
• Current year-to-date income records for certain guaranteed-payment exceptions.

A lender may ask for more documents. Requirements can vary by loan program, lender, and loan file.

Two ways the income may qualify

You received distributions

The lender can verify that the business paid money to you. The distributions should be consistent with the business income used to qualify.

Bank records, business records, and tax documents may help connect the payment to the K-1 income.

The business can support a withdrawal

If the business did not distribute all the income, the lender may review its liquidity. This means the business has enough available cash or resources to support a withdrawal.

The lender uses judgment when reviewing liquidity. Not every undistributed dollar will count.

How guaranteed payments are different

A guaranteed payment is generally paid to a partner for services or the use of capital. It is not the same as a regular distribution.

Under Fannie Mae guidance, guaranteed payments from a partnership or LLC may be added to cash flow when you have a two-year history of receiving them.

A limited exception may apply when you recently gained nominal ownership in a professional services partnership. Examples include a medical practice or law firm.

In that case, the lender may rely on guaranteed compensation if the partnership agreement and current year-to-date income support it.

Where an LLC fits

An LLC is a legal business structure. Its tax treatment can vary.

An LLC may issue a K-1 when it is taxed as a partnership or S corporation. The lender will review your ownership percentage, tax documents, income history, and available cash.

Do not assume that every LLC owner is treated as self-employed for every mortgage purpose. Under the Fannie Mae rule discussed here, ownership below 25% may fit the separate K-1 category.

Prepare before you apply

Start early if you plan to buy in St. Petersburg, Pinellas County, Tampa Bay, or elsewhere in Florida. K-1 income often needs more review than W-2 income.

1. Confirm your ownership percentage. Gather the current ownership record.
2. Collect two years of returns and K-1s. Include every page and schedule.
3. List your distributions. Note when and how you received them.
4. Explain changes early. Report reduced distributions, ownership changes, new debt, or business losses.
5. Keep business and personal funds clear. Clear records help the lender review business liquidity.

For a related topic, see our guide to getting a Florida mortgage with less than two years of self-employment.

You can also review our guide to how long mortgage underwriting takes in Florida.

Common mistakes to avoid

• Assuming taxable income equals cash received. It may not.
• Skipping the ownership review. The ownership line can change the underwriting path.
• Sending only one K-1. The lender may need the full tax return history.
• Hiding a declining trend. Explain changes early.
• Using business cash for the purchase. The lender may need to confirm that the withdrawal will not harm the business.

Questions borrowers ask

Can I qualify if I received no distributions?

Possibly. The business may need enough liquidity to support a withdrawal of earnings. The lender decides whether the records support that conclusion.

Do I need two years of K-1 income?

Fannie Mae requires a two-year income history for the under-25% K-1 category. Limited rules apply to certain guaranteed payments and K-1s that report only rental income.

Does under-25% ownership make approval easier?

No. It may place the income in a different Fannie Mae category. Approval still depends on the full loan file.

Can I use K-1 income for a refinance?

It may be possible. The loan program and lender must accept the income. The lender will still review its history and availability.

Official sources

• Fannie Mae Selling Guide B3-3.4-19: Schedule K-1 Income Under 25% Ownership
• Fannie Mae Selling Guide B3-3.5-01: Self-Employed Borrower Documentation
• IRS Instructions for Form 1065, U.S. Return of Partnership Income
• IRS Instructions for Form 1120-S, U.S. Income Tax Return for an S Corporation

Compliance note: This article is for education only. Loan programs, lender rules, and terms vary. All loans are subject to underwriting and credit approval. This is not a commitment to lend.