Short answer: Yes, you can get a mortgage when you’re self-employed. With a traditional loan, lenders usually average your last two years of tax returns, and they use your income after write-offs. If those deductions make your income look too low, a bank statement loan qualifies you on the deposits going into your bank account instead. There are also options that use a 1099, a profit and loss statement or your assets.
Your options at a glance
| Loan option | How income is verified | Best for |
|---|---|---|
| Conventional or FHA | Usually 2 years of personal and business tax returns | Business owners whose taxable income is strong |
| Bank statement loan | 12 or 24 months of personal or business bank statements | Owners with big write-offs or uneven income |
| 1099 loan | 1099 forms, often 1 or 2 years | Independent contractors and gig workers |
| P&L loan | A profit and loss statement, often prepared by a CPA | Owners with clean books but complex returns |
| Asset-based loan | Savings, investments or retirement accounts | People with large assets but irregular income |
| DSCR loan (rentals only) | The property’s rent, no personal income | Self-employed real estate investors |
Why self-employed borrowers get turned down
Most denials come down to one thing: the income on your tax return. Deductions for vehicles, home office, equipment and depreciation lower your tax bill, but they also lower the income a lender is allowed to count. A business that deposits $25,000 a month might show only $5,000 a month in taxable income.
Other common hurdles:
- Less than two years in business. Many traditional programs want a two-year history, though some allow less with prior experience in the same field.
- Declining income. If this year is lower than last year, lenders often use the lower number or ask for an explanation.
- Mixing personal and business money, which makes deposits harder to read.
How a bank statement loan works
Instead of tax returns, the lender reviews 12 or 24 months of bank statements and averages your deposits. For business accounts, a set percentage, called an expense factor, is subtracted to account for business costs, or your CPA can provide your actual expense ratio. For personal accounts, deposits are usually counted in full after transfers and one-time items are removed.
Example: Your business account averages $30,000 a month in deposits. Using a 50% expense factor, the qualifying income would be about $15,000 a month, often far more than a tax return would show.
Bank statement loans are a type of Non-QM loan. Rates are usually higher than conventional, and down payments commonly start around 10% to 20%, depending on credit and the property.
How to get ready
- Pull 24 months of statements for every account your income goes into.
- Keep business and personal accounts separate going forward.
- Have your business license, CPA letter or proof of how long you’ve been in business ready.
- Check your credit and pay down card balances if you can.
- Know your down payment and reserves. Lenders want to see the funds have been in your account for a while.
- Talk to a lender before you file your next return. Sometimes the timing of filing changes which program you qualify for.
Mistakes that slow down self-employed borrowers
- Shopping before talking to a lender. Falling in love with a home before you know which program fits can lead to a rushed, more expensive loan.
- Big unexplained deposits. Moving money between accounts or depositing cash right before applying creates questions. Keep a paper trail.
- Taking on new debt. A new truck or equipment loan during the process can change what you qualify for.
- Using business funds for the down payment without a plan. Many lenders allow it, but may want a CPA letter confirming it won’t hurt the business.
- Assuming you’ll be turned down. Many business owners who were denied by a bank qualify easily with the right program.
What the process looks like
- A short conversation about how you earn money, your accounts and your goals.
- Program match: tax returns, bank statements, 1099, P&L or assets, whichever gives you the best result.
- Pre-approval based on your documents, so you can shop with confidence.
- Underwriting and appraisal once you’re in contract.
- Closing. Then, if your tax returns improve later, you may be able to refinance into a conventional loan.
Frequently asked questions
How long do I need to be self-employed to get a mortgage?
Many programs want two years, but some accept less, especially if you worked in the same field before going out on your own. Tell us your history and we’ll tell you which programs fit.
Can I use a bank statement loan to buy my primary home?
Yes. Bank statement loans can be used for primary homes, second homes and investment properties, for purchases and refinances.
Are bank statement loans more expensive?
Usually somewhat, because income isn’t documented the traditional way. For many self-employed buyers, it’s the difference between qualifying and not, and you can refinance later if your tax returns improve.
Do I need a CPA?
Not always. Some programs ask for a CPA letter or a CPA-prepared P&L, while others only need the statements and a business license.
I’m a 1099 contractor. Does that count as self-employed?
Yes. Contractors can use traditional loans with tax returns, or a 1099 or bank statement loan if their deductions lower their taxable income.
Find out what you qualify for
Tell us how you earn your income and what you want to buy or refinance. We’ll tell you which option fits and what you’ll need. Learn more about bank statement loans and Non-QM loans, or call 949.423.3883.
Get a straight answer on your income
Tell us how you earn your income and we’ll tell you which loan fits. No cost to find out what you qualify for.