Self-employed guide
Getting a mortgage when you're self-employed: what lenders actually check
If you're self-employed, the mortgage process runs on a different set of rules than it does for a W-2 employee. Lenders aren't being difficult on purpose — they're trying to answer one question: is your income stable enough, and provable enough, to reliably cover a payment for the next 30 years. Here's what that actually means in practice.
Lenders use your net income, not your revenue
This is the part that surprises the most people. If your business brought in $180,000 last year but you wrote off $90,000 in expenses, most conventional lenders will qualify you based on roughly $90,000 — the net income shown on your tax return, not the revenue your business generated. Aggressive write-offs that lower your tax bill also lower your qualifying income for a mortgage.
You'll typically need two years of tax returns
Most lenders want two years of personal returns, and business returns if you operate as an LLC, S-corp, or partnership. They average your income across those two years, and if this year is meaningfully lower than last year, they'll typically use the lower figure or ask for an explanation. A single strong year usually isn't enough on its own.
Documents to have ready
Two years of personal tax returns, two years of business returns if applicable, a year-to-date profit and loss statement, business bank statements, and a CPA letter confirming your business is still active are the core items most underwriters ask for. Having these organized before you apply speeds up the process considerably.
Debt-to-income ratio still applies the same way
Once your qualifying income is calculated, lenders compare your total monthly debts, including the new mortgage payment, against that income the same way they would for anyone else. Use the mortgage calculator with your net qualifying income, not your gross business revenue, to get a realistic read on what payment you can support.
A dip in income doesn't automatically disqualify you
If your income dropped for a specific, explainable reason — a slow year, a client who paid late, a temporary drop in hours — a letter of explanation alongside strong current-year numbers can help. Lenders are generally more concerned with a declining trend than a single off year with a clear cause.
Frequently asked questions
Can I get a mortgage with one year of self-employment?
It's possible but harder. Some lenders will consider one year of self-employment if you have a strong history in the same field as a W-2 employee immediately before going independent. Most conventional lenders still prefer two years.
Does an LLC or S-corp change how income is calculated?
Yes. For an S-corp, lenders typically look at your W-2 wages from the business plus your share of the company's net profit. For a sole proprietorship, they work from your Schedule C. The structure changes which forms underwriting reviews, not whether you can qualify.
Will writing off fewer expenses help me qualify for a bigger loan?
Often, yes — a higher reported net income raises your qualifying income, though it also raises your tax bill. Some self-employed borrowers planning to buy within the next year or two deliberately reduce write-offs during that window. Talk to your CPA before changing this, since it affects both your taxes and your mortgage options.