Mortgage Options for Self-Employed Buyers

Being your own boss has its perks. But when it comes to applying for a mortgage, nontraditional income can make things more complicated.

Traditional mortgage applications often favor W-2 income. If you don’t earn that way, it might be harder to prove your financial stability on a mortgage application. But that doesn’t mean you won’t qualify.

Fortunately, self-employed borrowers and those with irregular income streams still have plenty of options. Here are a few that might be worth looking into:

Bank Statement Loans

Instead of relying on your tax returns, bank statement loans let you qualify using 12 to 24 months of personal or business bank statements. This is helpful if your taxable income appears low due to deductions, even though your actual cash flow is strong.

1099 and Profit & Loss (P&L) Loans

Freelancers or independent contractors may be able to qualify using 1099 forms or a CPA-prepared P&L statement that shows steady income.

Debt Service Coverage Ratio (DSCR) Loans

If you’re a real estate investor, a DSCR loan uses the property’s rental income to determine eligibility — no personal income verification needed.

Asset-Based Loans

These loans are ideal for borrowers with significant savings or investments, such as stocks or retirement accounts. Future earnings from contracts (like with athletes or entertainers) may also qualify.

Even with variable income, some borrowers still qualify for conventional loans or government-backed options like FHA, VA or USDA loans.

Eligibility Requirements

Requirements vary, but you’ll typically need:

• 12-24 months of steady, documented income history (e.g., tax returns, bank statements, P&L statements, 1099s)
• A minimum credit score of 580-640
• A debt-to-income ratio below 50%
• A minimum down payment of 0-20%
• Strong savings/cash reserves

Have questions? Let’s talk and find the best financing option for your situation.