Mortgage  Question?
How Does a Trading Loss Affect Mortgage Qualification?

How does a trading loss affect my ability to qualify for a mortgage?

Harry Jensen, Trusted Mortgage Expert with 45+ Years of Experience
, Trusted Mortgage Expert with 45+ Years of Experience

If trading is an ongoing activity or source of income or losses, then the loss impacts your ability to qualify for a mortgage. If the trading loss is a one-time event and not an ongoing activity then it should not factor into your income when you apply for a mortgage. The answer ultimately depends on if the loss is reported on your tax returns and if you want to use trading income to qualify for the mortgage.

Lenders review your tax returns for the prior two years when you submit your mortgage application. If the trading loss or gain appears on your tax returns in both years then lenders usually factor it into your income.

In many cases, people who trade assets, commodities or currencies include losses on their tax returns to offset their income. If you regularly report your trading losses on your tax returns, the lender factors in these losses when you apply for a mortgage, which lowers your gross income and reduces the loan amount you qualify for. You cannot include the losses on your tax returns to lower your taxable income and expect a mortgage lender to ignore the losses and use a higher income figure.

For example, if you lose $5,000 a year trading trading forex as a part-time activity and earn $85,000 a year from your full-time job, you may be inclined to report the forex losses on your tax returns to reduce your taxes. In this example, the lender subtracts the $5,000 in trading losses from your annual gross income and uses $80,000 in income to determine the mortgage amount you qualify for. You may also want to explore a less expensive hobby.

Use ourMORTGAGE QUALIFICATION CALCULATORto determine the loan amount you can afford

If the trading loss appears on only one year of your tax returns and trading is not your primary source of income, then the lender may be more likely to exclude the loss to calculate your income. In this scenario, the lender uses a higher income figure, which increases the mortgage amount you qualify for. You may also be required to provide a letter that explains the event and indicates that the loss only occurred once.

The same approach applies to one-time trading gains. Unless you have at least a two year track record of relatively consistent earnings from trading, the lender excludes the income from your mortgage application.

In short, lenders want to use predictable, permanent income to qualify you for a mortgage. If you can document that trading provides a consistent source of income, then it may help you get approved. If you consistently report trading losses, the losses can make it much more challenging to qualify for a mortgage.

Please note that if a trading loss or gain does not appear on your tax returns then it is unlikely that the loss or income is factored into your mortgage application.

Because qualification guidelines for trading losses may vary, we recommend that you contact multiple lenders in the table below to understand how they would handle your unique situation. It is important to understand your ability to qualify and the loan amount you can afford before you apply for the mortgage. Plus, shopping lenders enables you to find the best loan terms.

Current Mortgage Rates in San Diego1, California1 as of October 31, 2020
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Data provided by Brown Bag Marketing, Inc. Payments do not include amounts for taxes and insurance premiums. Read through our lender table disclaimer for more on rates and product details.


"B3-3.1-09, Other Sources of Income."  Selling Guide: Fannie Mae Single Family.  Fannie Mae, October 2 2019.  Web.

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About the author
Harry Jensen, Mortgage Expert

Harry is the co-founder of FREEandCLEAR. He is a mortgage expert with over 45 years of industry experience. Over his career, Harry has closed thousands of loans for satisfied borrowers and now offers his advice and insights on FREEandCLEAR.  Harry is a licensed mortgage professional (NMLS #236752). More about Harry

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