What Is a Self-Employed Mortgage?

A self-employed mortgage is a home loan specifically tailored for individuals who earn their income through freelance work, contract jobs, or business ownership rather than traditional salaried employment. Since self-employed borrowers often have fluctuating income and may take tax deductions that lower their reported earnings, qualifying for a mortgage can be more complex. Lenders typically require alternative documentation such as two years of personal and business tax returns, profit and loss statements, or bank statements to assess income stability and repayment ability.

To accommodate the unique financial situations of self-employed individuals, some lenders offer specialized mortgage programs—often referred to as bank statement loans or self-employed loans—that evaluate income based on deposits instead of tax returns. While these loans may have slightly higher interest rates or require a larger down payment, they provide essential flexibility. With proper preparation and documentation, self-employed borrowers can successfully secure financing for a home that fits their lifestyle and business goals.

Self-Employed Mortgage Requirements

While lending standards vary by lender, here are the common requirements for a self-employed mortgage:

Proof of Self-Employment: At least 2 years of self-employment history, verified through business licenses, tax returns, or CPA letters.

Income Documentation: 2 years of personal and business tax returns, or 12–24 months of bank statements.

Credit Score: A good credit score (typically 620 or higher) improves approval chances.

Debt-to-Income Ratio (DTI): Lenders usually prefer a DTI of 43% or less, but some may allow higher for strong borrowers.

Benefits of a Self-Employed Mortgage

  • Flexible Documentation Options

    Use bank statements, 1099s, or business records instead of W-2s or pay stubs.

  • Tailored Loan Programs

    Access to non-QM and alternative loan products that cater specifically to self-employed income structures.

  • Opportunity to Qualify Based on Gross Deposits

    Some programs evaluate income using total business deposits, which can benefit those with significant cash flow.

Who Qualifies For a Self-Employed Mortgage?

Self-employed mortgages are ideal for a range of independent earners, including:

✓ Small Business Owners: Entrepreneurs running sole proprietorships, LLCs, or corporations.

✓ Freelancers & Independent Contractors: Gig workers, consultants, or professionals with 1099 income.

✓ Real Estate Investors: Individuals with income from rental properties or real estate portfolios.

✓ Seasonal or Commission-Based Earners: Those with fluctuating income streams, like sales professionals.

We'll show you exactly what's possible—without the red tape.

Self-Employed Mortgage Process

Here’s a step-by-step overview of how the process typically works:

1

Pre-Approval

Submit your financial documents to get pre-approved and determine your budget.

2

Identifying the Property

Work with a real estate agent to find a home that fits your needs and price range.

3

Underwriting

The lender reviews your income documents, business history, and credit to assess risk.

4

Final Loan Approval

Once underwriting conditions are satisfied, your loan is cleared for closing.

5

Closing

Sign the final paperwork, pay any closing costs, and take ownership of your new home.

What Can You Finance With a Self-Employed Mortgage?

Self-employed borrowers can use these loans for a variety of real estate purchases, including:

Primary Residences: Buy a home you intend to live in full-time.

Second Homes: Second Homes: Finance a vacation property or seasonal residence.

Investment Properties: Purchase real estate for rental income or long-term investment.

Refinancing Existing Mortgages: Refinance to lower your rate or cash out equity.

Frequently Asked Questions About Self-Employed Mortgages

  • Most lenders prefer two years, but some may accept one year with strong documentation and prior related experience.

  • Yes. Many lenders offer bank statement loan programs where income is verified using 12–24 months of personal or business bank statements.

  • Not necessarily. If your credit and income are strong, you may qualify for competitive rates—though alternative documentation loans may carry slightly higher rates.

  • Absolutely. Pre-approval is highly recommended and gives you a clear idea of what you can afford before house hunting.

Success Stories

❝

Michael & Sarah Rodriguez

★ ★ ★ ★ ★

Working with this team made the complicated Los Angeles market much easier to navigate. Their expertise in conventional loans saved us thousands in interest and helped us close quickly on our Silver Lake home.

First-time homebuyers

❝

James & Amelia Wilson

★ ★ ★ ★ ★

The 203K loan process seemed intimidating at first, but this team guided us through every step. We were able to transform a fixer-upper in Highland Park into our dream home while staying within our budget. Their contractor recommendations were excellent.

Renovation loan clients

❝

David Chen

★ ★ ★ ★ ★

After being turned down by two other lenders, I was losing hope of being able to purchase and renovate my first property. This team not only got my FHA 203K loan approved, but they also helped me understand exactly what renovations would add the most value in my Echo Park neighborhood.

Self-employed borrower

Start Your Los Angeles Home Transformation

Get pre-approved for an FHA 203k loan and discover your renovation budget today