Self-Employed Mortgages

Absolutely. Self-employed borrowers get mortgages every day. The key is working with a lender that understands self-employment income. Traditional lenders calculate your income from tax returns, which often show reduced income due to legitimate business deductions. At DirectLender.com, we offer bank statement loan programs that look at your actual deposits instead of your tax return income. We also offer full-documentation options for self-employed borrowers with strong tax return income.

A bank statement mortgage allows you to qualify using 12 to 24 months of bank statements instead of tax returns. The lender reviews your deposits and calculates an average monthly income, typically using 50-100% of deposits depending on whether you use personal or business bank statements. This program is ideal for self-employed borrowers who take significant tax deductions that reduce their reported income. Bank statement loans typically require 10-20% down and a credit score of 660 or higher.

For a full-documentation mortgage, self-employed borrowers typically need two years of personal tax returns (1040s), two years of business tax returns (1120, 1120S, or 1065), a year-to-date profit-and-loss statement, business license, two months of bank statements, and a letter from your CPA verifying your business. For bank statement programs, you need 12-24 months of bank statements, a business license, and a CPA letter. All programs require standard items like identification, credit check, and property appraisal.

Most mortgage programs require at least two years of self-employment history in the same business or field. Some programs accept one year if you have a strong prior employment history in the same industry. For example, an accountant who worked for a firm for five years and then started their own practice may qualify with only one year of self-employment. The two-year requirement helps lenders verify that your self-employment income is stable and likely to continue.

For full-documentation conventional loans, self-employed borrowers generally receive the same rates as W-2 employees if they meet the standard requirements. Bank statement loans and other alternative documentation programs do carry slightly higher rates, typically 0.5% to 1.5% above conventional rates, because they represent more risk to the lender. However, the ability to qualify at a higher loan amount often offsets the rate difference. Your DirectLender.com loan officer can compare all available options to find the most cost-effective solution.