Foreign Earnings

Estimated reading time: 2 minutes

Foreign employment can produce different figures in an employer record, a U.S. tax return and a mortgage review. The definitions matter.

Start with the mortgage guide’s definition

Fannie Mae’s March 4, 2026 guidance defines foreign income as earnings from employment by a foreign corporation or foreign government, paid in foreign currency.

For borrowers using that income to qualify, it requires copies of signed federal income tax returns for the most recent two years that include foreign employment-related income. Requirements for the particular source and income type also apply.

Foreign-origin documents must be completed in English or have a complete, accurate translation attached by the lender. Income must be translated into U.S. dollars. Keep translation of the document’s language distinct from conversion of its monetary figures; the rule requires both, rather than treating one as a substitute.

Read the exclusion as a separate tax entry

The 2025 Form 2555 instructions define foreign earned income around compensation for personal services performed in a foreign country during the relevant qualifying period. Tax-home and bona fide residence or physical-presence conditions matter. A foreign employer’s name alone does not establish eligibility for the exclusion.

The instructions separately address foreign earnings included in Form 1040 or 1040-SR and the combined exclusion calculation carried from Form 2555 line 45 to Schedule 1 line 8d as a negative amount. An exclusion entry is therefore not a statement that the underlying employment produced no earnings.

Ask the lender how the identified earnings and exclusion entries affect its review; neither entry independently determines qualifying mortgage income.