Self-Employed Home Loans
Tailored mortgage solutions for entrepreneurs, freelancers, and business owners with flexible income verification options.
Alternative Income Documentation
Use bank statements, profit & loss reports, and 1099s instead of traditional tax returns to verify your income.
Business Cash Flow Focus
Loans that consider your actual business cash flow rather than the income reported on tax returns after write-offs.
Competitive Interest Rates
Access competitive rates comparable to conventional loans despite using alternative income verification methods.
Various Property Types
Finance primary residences, second homes, and investment properties with solutions tailored for the self-employed.
Shorter Self-Employment History
Qualify with as little as one year of self-employment history, compared to the standard two years required by conventional loans.
Flexible DTI Requirements
More lenient debt-to-income ratio requirements that accommodate the unique financial profiles of business owners.
Income Documentation
- 12-24 months of personal or business bank statements
- Profit & loss statements prepared by CPA
- 1099 forms from the past 1-2 years
- Evidence of ongoing business operations
Financial Requirements
- Minimum credit score of 620-680 (varies by program)
- Down payment of 10-20% (program dependent)
- Cash reserves of 6-12 months recommended
- Debt-to-income ratio typically below 50%
Business Requirements
- Minimum 1-2 years of self-employment history
- Business license or equivalent documentation
- Stable or increasing business income
- Business in an eligible industry
Income Calculation Methods
For self-employed borrowers, lenders calculate income differently than for W-2 employees. Bank statement programs typically analyze deposits over 12-24 months to determine average monthly income, often applying a factor to account for business expenses (typically 25-50% depending on industry). For P&L programs, lenders may use net profit figures verified against bank statements to establish income. Understanding these calculation methods can help you better prepare your application.
Documentation Strategies
To strengthen your loan application, separate personal and business finances with dedicated accounts, maintain clean and organized financial records, work with an accountant familiar with mortgage applications for self-employed individuals, and prepare documentation well in advance of your application. Having additional assets or a co-borrower with W-2 income can also improve your eligibility for more favorable loan terms.
Initial Consultation
Begin with a discussion about your business, income structure, and financial goals to determine the best mortgage solution for your self-employed status.
Documentation Preparation
Gather required financial documents including bank statements, business records, profit & loss statements, and other alternative documentation to verify income.
Pre-Qualification
Based on your documentation, we'll determine what loan amount you qualify for and provide options tailored to your self-employed status.
Property Selection
With pre-qualification in hand, work with a real estate agent to find a home that meets your needs and fits within your budget.
Underwriting & Approval
Once you've selected a property, your application enters underwriting where your business financials and alternative documentation are thoroughly reviewed.
Closing
After final approval, you'll attend closing to sign documents and receive the keys to your new home, completing your self-employed home loan journey.
| Feature | Self-Employed Loan | Conventional Loan | FHA Loan |
|---|---|---|---|
| Income Verification | Bank statements, P&Ls, 1099s | 2 years of tax returns required | 2 years of tax returns required |
| Self-Employment History | As little as 1 year (program dependent) | Minimum 2 years required | Minimum 2 years required |
| Tax Return Requirements | Often not required | 2 years of personal & business returns | 2 years of returns typically required |
| Interest Rates | Slightly higher (0.5-2% above conventional) | Lowest available rates | Competitive, government-backed rates |
| Down Payment | 10-20% typical (varies by program) | 3-20% down payment | 3.5% minimum down payment |
| Debt-to-Income Ratio | Up to 50% or higher in some cases | Typically max 43-45% | Typically max 43-50% |
The Bottom Line
Self-employed loan programs offer valuable alternatives for business owners who may not qualify under conventional guidelines due to tax write-offs and complex income structures. While these programs may come with slightly higher interest rates or down payment requirements, they provide crucial access to homeownership for entrepreneurs and freelancers by considering their actual cash flow rather than just taxable income. For many self-employed individuals, these programs represent the most realistic path to mortgage approval.
After being turned down by two banks due to my tax deductions as a consultant, I found the bank statement program that actually looked at my real income instead of my tax returns. Within 30 days, I closed on my dream home with better terms than I expected.
As a freelance designer with irregular income, I was worried I'd never qualify for a mortgage. The team at Self-Employed Home Loans understood my situation and found a loan that worked with my 12 months of bank statements. They made what seemed impossible completely achievable.
Owning three small businesses made my finances too complex for traditional lenders. The P&L loan program was perfect for my situation—they considered all my income sources and got me approved at a competitive rate despite my complicated tax returns. I couldn't be happier with the service.
How do bank statement loans work for self-employed individuals?
Bank statement loans use your personal or business bank deposits to verify income rather than tax returns. Typically, lenders analyze 12-24 months of bank statements to calculate an average monthly income. They may apply an expense factor (usually 25-50% depending on your industry) to business deposits to determine net income. This approach allows self-employed borrowers to qualify based on their actual cash flow rather than taxable income after deductions and write-offs.
What credit score do I need for a self-employed mortgage?
Credit score requirements vary by program, but most self-employed mortgage options require a minimum score of 620-680. Some premium programs with better rates may require 700+. However, credit score is just one factor—a strong score can offset other challenges in your application, while a lower score might be acceptable with compensating factors like a larger down payment, substantial cash reserves, or a very low debt-to-income ratio.
How much self-employment history do I need to qualify?
While conventional loans typically require two years of self-employment history, many alternative programs for self-employed borrowers can work with as little as one year of history. Some specialized programs may even consider less time if you have strong compensating factors or previously worked in the same industry before becoming self-employed. The stability and growth trajectory of your business during your self-employment period are often more important than the exact length of time.
Are interest rates higher for self-employed borrowers?
Self-employed mortgage programs typically have slightly higher interest rates than conventional loans—usually 0.5% to 2% higher, depending on your financial profile and the specific program. This rate premium reflects the additional perceived risk associated with alternative income documentation. However, these rates are still very competitive when compared to other non-QM (non-qualified mortgage) products, and the benefit of qualifying based on cash flow rather than tax returns often outweighs the modest rate difference.
Can I use business funds for my down payment?
Yes, you can often use business funds for your down payment if you're self-employed, but there are specific requirements. Typically, you must be the majority owner (usually 51%+ ownership) of the business, and you must document that the withdrawal of funds won't negatively impact your business operations. Lenders will usually require a letter from your CPA confirming this, as well as business bank statements showing sufficient remaining operating capital after the withdrawal.
Can I refinance my existing mortgage with a self-employed loan program?
Yes, self-employed loan programs can be used for refinancing as well as purchases. If your income situation has changed since your original mortgage (such as becoming self-employed) or if you're having difficulty qualifying for a conventional refinance due to tax write-offs, a bank statement or other alternative documentation program could be an excellent solution. These programs can be particularly valuable for cash-out refinances when business owners need to access equity for business expansion or other purposes.
