Common questions for self-employed borrowersFor business owners, 1099 contractors, gig workers, partnerships, and S-corps. Twenty-five of the questions people search and ask AI most often, answered in plain English for Texas. |
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1. Can I get a mortgage if I am self-employed?
2. How many years in business do I need?
3. What income actually counts?
4. Why do tax write-offs hurt my mortgage?
5. What are add-backs?
6. What is a bank statement loan?
7. Do I still need tax returns on a bank statement loan?
8. How is Schedule C income different from an S-corp?
9. Can I use K-1 income from a partnership or S-corp?
10. I am a 1099 contractor. Is that self-employed?
11. What documents do self-employed borrowers need?
12. What credit score do I need if I am self-employed?
13. How much down payment for a self-employed loan?
14. What is DTI for a self-employed borrower?
15. I just started my business. Can I qualify?
16. I have W-2 income and a side business. How is that treated?
17. Should I pay myself a bigger W-2 from my S-corp before I apply?
18. What about large deposits in my business account?
19. Can I use a CPA-prepared P&L?
20. Can I use FHA or VA if I am self-employed?
21. How long does a self-employed mortgage take?
22. Should I wait until this year’s taxes are filed?
23. What if my income is declining?
24. I work gig apps (Uber, DoorDash, 1099). Can I buy?
25. Why use a broker if I am self-employed?
Can I get a mortgage if I am self-employed?
Yes. Lenders usually average two years of tax returns and may add back depreciation and other allowed items. If write-offs make the tax return look thin, a bank-statement or other non-QM option may fit. We work with Schedule C, 1099, K-1, and S-corp files all the time.
How many years in business do I need?
Two years of self-employment is the typical qualified-mortgage rule. Some files can work with a shorter history if you were in the same line of work as a W-2 employee first. Brand-new businesses usually need more down payment or a different program.
What income actually counts?
On a conventional, FHA, VA, or USDA loan, it is usually the net income on your tax returns, averaged, plus allowed add-backs. It is not your gross deposits and not what you pay yourself if that number is not supported. Bank-statement loans use deposits instead of the return.
Why do tax write-offs hurt my mortgage?
Write-offs lower taxable income, which is what most underwriters use. A truck, home office, or equipment deduction that helped at tax time can shrink qualifying income. That is why two otherwise similar businesses can qualify very differently.
What are add-backs?
Certain non-cash or one-time expenses can be added back to net income, such as depreciation on many files. The exact list depends on the loan program. We will show you the qualifying number after add-backs, not just the bottom line on the 1040.
What is a bank statement loan?
It qualifies you on 12 or 24 months of business or personal deposits instead of tax returns. It is built for owners whose cash flow is strong but the return is low because of write-offs. Rates and down payments are usually higher than conventional. If the tax return already supports the loan, conventional is often cheaper.
Do I still need tax returns on a bank statement loan?
Many bank-statement programs do not use the return to calculate income. You will still prove the business exists, ownership percentage, and that deposits are yours. Each lender’s overlay is different. We will tell you which path needs a return and which does not.
How is Schedule C income different from an S-corp?
Schedule C uses net profit on the return. An S-corp usually counts W-2 wages you paid yourself plus your share of ordinary income on the K-1, with rules on distributions. If you keep W-2 wages very low to save payroll tax, qualifying income can look smaller than the business actually makes.
Can I use K-1 income from a partnership or S-corp?
Yes, when ownership, history, and liquidity tests are met. Lenders want to see the K-1s, the business returns, and often that you actually received the income or that the business can support it. Paper K-1 income you never take home may not fully count.
I am a 1099 contractor. Is that self-employed?
Usually yes. 1099-NEC or 1099-MISC income is typically treated as self-employment, even if you only have one client. Some 1099-only programs exist. Two years of 1099s plus returns is the common conventional path.
What documents do self-employed borrowers need?
Typically two years of personal returns with all schedules, business returns if you file them, YTD profit and loss, business license or CPA letter, and bank statements. K-1s and W-2s from your own company if you take a salary. A short list beats a scavenger hunt. We will send yours.
What credit score do I need if I am self-employed?
Same program floors as anyone else: FHA can go to 580 with 3.5% down; conventional often around 620. Bank-statement lenders commonly want scores in the 620 to 680 range, with better pricing higher. Credit does not replace two years of numbers.
How much down payment for a self-employed loan?
FHA 3.5%, conventional as low as 3%, VA 0% if eligible, when the tax returns support it. Bank-statement and other non-QM loans often want about 10% to 20% down. More down can offset a thin return or a shorter history.
What is DTI for a self-employed borrower?
Debt-to-income still compares monthly debts to qualifying income. The twist is how income is calculated. A high gross-deposit business can still have a high DTI if net on the return is low. We run conventional and bank-statement DTI side by side when both are possible.
I just started my business. Can I qualify?
Harder on agency loans. If you left a W-2 job in the same field, some programs will bridge the gap. Otherwise, expect more down payment, reserves, or a non-QM option. Do not quit a W-2 mid-application without talking to us first.
I have W-2 income and a side business. How is that treated?
The W-2 is usually straightforward. The side business is added only if it is stable and documented. A new side hustle with losses can actually hurt the file. Bring both the stubs and the Schedule C so we do not miss a loss.
Should I pay myself a bigger W-2 from my S-corp before I apply?
Maybe, but it takes time to season and it changes payroll taxes. A last-minute raise to yourself can look like you manufactured income. Talk to us and your CPA before you change how you pay yourself.
What about large deposits in my business account?
Underwriters will ask where they came from. Transfers, customer payments, and documented capital are fine. Unexplained cash or money from the seller is not. Keep business and personal money easy to follow for 60 days before you apply.
Can I use a CPA-prepared P&L?
Some non-QM programs qualify from a CPA P&L, often with a matching bank-statement test. Conventional, FHA, VA, and USDA still live on tax returns. A P&L is a supplement, not a substitute, on those loans.
Can I use FHA or VA if I am self-employed?
Yes, if the returns support the income. VA is often flexible on documentation once eligibility is there. FHA still wants two years in most cases. Self-employed does not block government loans. Thin net income does.
How long does a self-employed mortgage take?
Plan on a little more time than a clean W-2 file, often about 25 to 40 days, because returns and business paperwork take longer to underwrite. Bank-statement files depend on how fast statements can be analyzed. Starting the package before you shop houses helps.
Should I wait until this year’s taxes are filed?
If the new return will raise your average, waiting can help. If it will show a decline, filing it can hurt. We will look at last year, YTD, and what is about to hit the IRS before you decide.
What if my income is declining?
Declining self-employed income is one of the first things underwriting flags. We may use the lower year, haircut the average, or not count it. A one-time bad year with a written explanation and a rebound can still work. Do not hide the decline.
I work gig apps (Uber, DoorDash, 1099). Can I buy?
Yes, with history. Treat it as self-employment: 1099s, returns, and a stable pattern of deposits. A few months on an app is usually not enough. Two years, or one strong year plus prior related work, is the more realistic path.
Why use a broker if I am self-employed?
Self-employed files get turned down at one bank and approved at another on the same numbers, because overlays differ. We shop conventional, FHA, VA, and bank-statement investors for the same package so you are not stuck with the first no.
Have Questions?
Online answers get you oriented. A quick conversation gets you numbers for your file. Call 512-784-4391, ask a professional, or apply now.
This page is for general education. It is not a commitment to lend or a guarantee of approval. Eligibility, rates, costs, and terms depend on credit, income, property, occupancy, loan program, and underwriting. Equal Housing Opportunity. Licensed by the Texas Department of Savings and Mortgage Lending.
