SELF-EMPLOYED LOANS

Mortgage options for self-employed

borrowers — because tax returns do

not tell the whole story.

You built a successful business, but your tax returns show a fraction of what you

actually earn. Write-offs, depreciation, and business expenses reduce your

taxable income, which is smart for taxes but makes qualifying for a traditional

mortgage difficult. We specialize in helping self-employed borrowers find the right

loan program, whether that is a bank statement loan, a 1099 program, or traditional

financing with the right preparation.

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Talk to us about your situation

Why self-employed borrowers face different challenges

Traditional mortgage underwriting was built for W-2 employees. You submit pay stubs, your employer confirms your salary, and the lender calculates what you can afford. Simple.

Self-employed borrowers do not fit that model. Your income might fluctuate seasonally, you might pay yourself differently each month, and your tax returns, after legitimate deductions for business expenses, vehicle, home office, depreciation, and retirement contributions, show a net income far below what you actually bring in. A business owner earning $200,000 in revenue might show $80,000 on their tax return after write-offs. That is not fraud, that is smart tax planning. But a traditional lender sees $80,000 and underwrites accordingly.

The solution is matching you with the right loan program, one that looks at your actual cash flow, not just your taxable income.

Loan Programs for Self-Employed Borrowers

Bank Statement Loans

Bank statement loans are the most popular option for self-employed borrowers who cannot qualify using tax returns. Instead of W-2s and 1040s, the lender reviews 12 to 24 months of personal or business bank statements and calculates your income based on average monthly deposits. No tax returns required. No employer verification. Your bank statements tell the real story of your cash flow.

Best for:

Business owners, freelancers, independent contractors, gig workers, and consultants with strong cash flow but tax returns that understate their income.

INCOME VERIFICATION

12 or 24 months of bank statements

CREDIT SCORE
620+ minimum, best pricing at 720+

PROPERTY TYPES

Primary, second home, and investment

DOWN PAYMENT

10% to 20% (varies by credit and LTV)

SELF-EMPLOYED HISTORY

2 years minimum in same business

RATES

Typically 1% to 2% above conventional

How bank statement income is calculated

The lender totals your deposits over 12 or 24 months and divides by the number of months to get average monthly income. For business bank statements, an expense factor (typically 50%) is applied, so if your average monthly deposits are $30,000, the lender counts $15,000 as qualifying income. Personal bank statements use 100% of deposits. Some industries with higher expenses (restaurants, construction) may use a 60% to 70% expense factor.

1099 income loans

If you receive 1099 forms from clients (common for independent contractors, real estate agents, consultants, and freelancers), 1099 income programs use one to two years of 1099s to document your earnings. This is simpler than bank statement programs because the income is already documented by your clients. No full tax returns needed — just the 1099 forms themselves.

INCOME VERIFICATION

1 to 2 years of 1099 forms

CREDIT SCORE

640+ minimum

DOWN PAYMENT

10% to 20%

TAX RETURNS

Not required

Best For: Independent contractors and freelancers who receive 1099-NEC or 1099-MISC forms and want a simpler documentation path than bank statements.

1099 Income Loans

Profit and Loss (P&L)

Statement Loans

Some non-QM lenders accept a CPA-prepared profit and loss statement as the primary income document. Your accountant prepares a P&L showing your business revenue, expenses, and net income, and the lender uses that figure for qualification. This works well for borrowers whose bank statements are messy (mixing personal and business funds) but whose accountant can produce clean financials.

INCOME VERIFICATION

CPA-prepared P&L statement

ADDITIONAL DOCS

CPA letter, business license, 2 months bank statements

DOWN PAYMENT

10% to 25%

CREDIT SCORE

660+ minimum

Traditional Full-Doc

(tax return) Loans

INCOME VERIFICATION

2 years personal and business tax returns

RATES

Best available — same as W-2 borrowers

DOWN PAYMENT

3% conventional, 3.5% FHA, 0% VA

INCOME CALCULATIONS

2-year average of net income from returns

Best For: Self-employed borrowers whose tax returns show enough income to qualify. We review your tax returns before you file so you understand the tradeoff between write-offs and mortgage qualification. Sometimes a small adjustment in how you take deductions can increase your qualifying income by $20,000 to $40,000 without significantly changing your tax bill.

Traditional Full-Doc

(tax return) Loans

If your tax returns support the loan amount you need, traditional financing (conventional, FHA, VA) gives you the best rates available, the same as W-2 borrowers. The lender uses your 2-year average net income from personal and business returns. The key is understanding how your deductions affect qualifying income before you file.

Asset Depletion Loans

If you have significant liquid assets (savings, investments, retirement accounts) but limited documentable income, asset depletion programs calculate a monthly income figure by dividing your total assets over a set period (typically 60 to 84 months). For example, $500,000 in liquid assets divided by 60 months equals $8,333 per month in qualifying income. This works well for recently retired business owners, high-net-worth individuals, or those living off investments.

How to prepare for a

self-employed mortgage

Preparation is the difference between a smooth closing and a frustrating denial. Here is what to do 3 to 6 months before you plan to buy or refinance.

Separate Personal and Business Bank Accounts

If you are using bank statement loans, clean bank statements make underwriting faster. Mixing personal and business funds in one account creates questions about which deposits are income versus transfers. Separate accounts give the lender a clear picture.

Keep Consistent Deposits

Lenders look for consistent monthly deposits. Large irregular deposits (a $50,000 lump sum followed by three months of $2,000) raise questions and may need to be explained with documentation. If your income is naturally lumpy, 24-month bank statements smooth out the average better than 12-month.

Talk To Us Before You File Taxes

If you plan to use traditional full-doc financing, we should review your returns before you file. Your CPA optimizes for tax savings, but aggressive write-offs can disqualify you from the loan amount you need. A quick review lets you make an informed decision about the tradeoff between saving $3,000 in taxes and qualifying for $50,000 more in mortgage.

Maintain Strong Credit

Bank statement and non-QM loans are more rate-sensitive to credit score than conventional loans. The difference between a 680 and a 740 score on a bank statement loan can be 0.5% to 1% in rate, which on a $400,000 loan is $160 to $330 per month. Pay down credit card balances below 30% of limits and avoid opening new accounts before applying.

Get your CPA Letter and Business License Ready

Most self-employed loan programs require a letter from your CPA confirming you have been in business for at least 2 years, plus a copy of your business license. Having these ready before you apply prevents delays.

KEY CONSIDERATIONS FOR SELF-EMPLOYED BORROWERS

Choosing the Right Program Is Critical

For self-employed borrowers, the difference between using tax return income and bank statement income can be dramatic. A business owner showing $80,000 on tax returns versus $150,000 in actual bank deposits might qualify for a $300,000 loan with one program and a $550,000 loan with another. Choosing the right documentation path is not a nice-to-have. It determines whether you can buy the home you want.

Down Payment Assistance May Still Be Available

If you qualify for traditional FHA financing using tax returns, you can still access state and local down payment assistance programs. Bank statement loans are non-QM products and do not pair with government DPA programs, but the higher qualifying income often offsets the need for assistance. We compare both paths to find the best total cost.

Your CPA and Your Lender Need to Be on the Same Page

The biggest mistake self-employed borrowers make is filing taxes without considering the mortgage impact. Your CPA optimizes for tax savings. Your lender needs enough documented income to approve your loan. These goals can conflict, but with planning, you can find a balance that works for both.

Common Self-Employed Scenarios

"My tax returns show $70,000 but I deposit $180,000 a year."

Classic bank statement loan candidate. Using 12 or 24 months of business bank statements with a 50% expense factor, your qualifying income would be roughly $90,000, enough to significantly increase your buying power compared to using tax returns.

"I just started my business 18 months ago."

Most bank statement programs require 2 years of self-employment history. If you are close but not there yet, we can explore options: if you were in the same industry as a W-2 employee before going independent, some lenders count that toward the 2-year requirement. Otherwise, waiting a few months to hit the 2-year mark is usually the smartest play.

"I am an independent contractor with 1099 income."

1099 income programs are the simplest path. Provide your 1099 forms and qualify based on that documented income. If your 1099 income is sufficient, this avoids the higher rates of bank statement loans entirely. If it is not enough, we can layer in bank statements to capture additional income.

"My spouse is W-2 but I am self-employed."

We can combine income sources. Your spouse qualifies traditionally with W-2 income, and your self-employed income is added using whichever documentation method works best: tax returns, bank statements, or 1099s. The W-2 income often anchors the deal and your self-employed income pushes the qualification higher.

"I own rental properties and want to buy another."

If you are a self-employed investor, DSCR loans may be a better fit than bank statement loans for investment properties. DSCR qualifies on the rental property cash flow, no personal income documentation at all. For your primary residence, bank statement or 1099 programs work. We often structure deals where the primary home uses bank statements and investment properties use DSCR.

"I want to refinance but my tax returns will not support it."

Bank statement loans work for refinances too, rate-and-term and cash-out. If you are sitting on equity but your tax returns prevent you from qualifying conventionally, a bank statement refinance lets you access that equity or lower your rate using your actual cash flow as qualification.

Frequently asked questions

Can I get a mortgage if I am self-employed?

Yes. Self-employed borrowers qualify for conventional, FHA, VA, and non-QM loans. The documentation is different: tax returns for traditional loans, bank statements or 1099s for non-QM. But the same loan programs are available.

How many years of self-employment do I need?

Most programs require 2 years. Some lenders accept less if you were previously employed in the same industry. Traditional loans (conventional, FHA) can sometimes work with 1 year of self-employment if the income trend is stable or increasing.

What is the interest rate on a bank statement loan?

Bank statement loan rates are typically 1% to 2% higher than conventional rates. On a $400,000 loan, that is roughly $250 to $500 more per month. The tradeoff is qualifying for a significantly larger loan amount based on your actual cash flow.

Do I use personal or business bank statements?

Either works, but they are calculated differently. Personal bank statements use 100% of deposits as income. Business bank statements apply an expense factor (typically 50%) since not all deposits are profit. We help you determine which approach results in higher qualifying income for your situation.

Can I get down payment assistance with a bank statement loan?

Bank statement loans are non-QM products and do not pair with government DPA programs. However, if your tax return income supports FHA qualification, you can use traditional FHA with full DPA benefits. We compare both paths to find the best total cost.

Should I talk to my CPA before applying for a mortgage?

Yes, and talk to us first. We review your tax situation and help you and your CPA understand how deductions affect your mortgage qualification. A small adjustment before filing can make a significant difference in what you qualify for.