Who this is for
- Sole proprietors, S-corp and LLC owners, 1099 contractors, and gig workers of any kind.
- Borrowers with two years of self-employment history, or one year plus a past W-2 job in the same field.
How it works, step by step
- Pull your last two years of tax returns and add up what a lender will use: net profit, plus depreciation, minus any decline.
- If that number is too low, ask about bank statement loans before you give up on buying.
- Do not file a heavy write-off return in the year you plan to buy a home.
- Keep business and personal accounts separate, since mixed accounts slow down the underwriting review.
Read next
- Bank statement loans explained: how self-employed borrowers qualify
A bank statement loan reads your deposits instead of your tax returns. Here is who it is for, how the math works, and what it does not do.
- What a bank statement loan really costs, and what we cannot verify
Lenders report bank statement loans run higher than a full-documentation loan. Here is the range, one real fee for comparison, and why no site can give you a single number.
- How lenders actually read your tax returns
A lender does not use your Schedule C bottom line as is. Here is exactly what gets added back, what gets averaged, and how to see your own likely number.
Try the calculator - Is the '49% of self-employed mortgages are denied' stat true?
A widely shared number claims half of self-employed borrowers get denied. We checked where it comes from and what the real, verifiable data shows instead.
Try the calculator - 1099 and gig income: how a lender sees you when you apply
Cross 25% of your income from 1099 or gig work, and Fannie Mae and Freddie Mac treat you as self-employed. Here is the exact line and what it means.
Try the calculator - The self-employed mortgage document checklist
Self-employed files stall in underwriting more often over a missing document than over low income. Here is the full list and why each item matters.
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Pros
- Conventional loans are fully available once you have two years of tax returns on file.
- Alternative paperwork loans exist for when your returns understate your true cash flow.
Cons
- More paperwork and a longer wait for approval than a typical W-2 borrower.
- Non-QM loans, loans that fall outside standard rules, cost more overall.
- A declining income trend is a red flag, even if your income is still fairly high.