Written and reviewed by Jack Gladden, Senior Loan Officer, NMLS #1470164
Updated · 6-minute read · How these guides are written
On this page
Self-employed mortgages in brief
- The problem
- Write-offs lower the income on your tax returns, and a traditional loan qualifies you on that taxed figure.
- Traditional first
- Two years of tax returns usually; one year can work if the business is five years old and you’ve owned 25% or more of it throughout.
- Bank statement loans
- Qualify on 12 or 24 months of deposits instead of tax returns, through specialist (non-QM) lenders.
- Other options
- Profit-and-loss statements, 1099s, or your assets, depending on how you’re paid.
- Typical terms
- Often 10–20% down, credit from about 620–700, usually a higher rate than a traditional loan.
- Who qualifies
- Business owners, freelancers and contractors, usually with two years in the same line of work.
Start with a traditional loan, if your returns allow it.
A traditional loan treats you as self-employed if you own 25% or more of a business. It reads your personal and business tax returns, usually for two years, and averages the income after write-offs. When those returns show enough income, it is usually the cheapest option, so that is where I start.
- Two years of returns
- The standard. Personal returns, plus business returns for partnerships and corporations.
- One year of returns
- Allowed when the business has existed for five years and you’ve owned 25% or more of it for those five years.
- Under two years
- Still possible if your latest return shows a full year in the business and you earned at a similar level in the same field before.
The catch is the write-offs: every deduction that lowers your tax also lowers the income a traditional lender can count. When the gap is large, a bank statement loan fills it.
How a bank statement loan works.
Instead of tax returns, the lender reviews 12 or 24 months of bank statements and works out your income from the deposits.
- Business statements
- Total eligible deposits, reduced by an expense factor for business costs. Many lenders use 50% by default; a letter from your CPA, tax preparer or bookkeeper can support a lower one, and some industries get a higher one.
- Personal statements
- Eligible deposits into your personal account, usually without an expense factor.
- What’s left out
- Transfers between accounts, loans, refunds and unusually large deposits that can’t be traced to the business.
| Example (business statements) | Monthly |
|---|---|
| Average eligible deposits over 24 months | $30,000 |
| Less a 50% expense factor | −$15,000 |
| Qualifying income | $15,000 |
Illustrative only. If your tax returns show $7,000 a month after write-offs, that difference is what can make the loan work. A lower documented expense ratio raises the qualifying figure.
Want to see what your statements show?
Send me 12 months of statements, business or personal, and a line about your business. I’ll estimate the income lenders are likely to use.
What bank statement lenders typically look for.
| Requirement | What’s typical |
|---|---|
| Time in business | Usually two years of self-employment in the same line of work, often confirmed by a CPA letter or business license. |
| Ownership | For business statements, many lenders want you to own at least 25–50% of the business. |
| Statements | 12 or 24 consecutive months, personal or business; some programs price better on 24. |
| Down payment | Often 10–20%, more with lower credit scores or for investment property. |
| Credit | Minimums around 620–700; higher scores open better pricing and lower down payments. |
| Debt-to-income | Many programs allow up to about 50% of qualifying income. |
| Reserves | Usually a few months of payments, more for larger loans. |
Other ways to qualify without tax returns.
Profit and loss
A 12- or 24-month P&L prepared by a CPA or tax preparer, sometimes with a few months of statements.
Best forOwners with an accountant and steady books
1099 income
One or two years of 1099s, often from a single payer, with an expense factor applied.
Best forContractors and commissioned earners
Asset-based
Qualify on savings and investments, spread over a set number of months, rather than income.
Best forOwners between deals, retirees, large savings
Rental income (DSCR)
For an investment property, qualify on the rent instead of your income.
Best forInvestors buying rentals
For investment property, see DSCR loans; buying from abroad, see foreign national and ITIN loans.
How to prepare.
- Keep business and personal money apart. A dedicated business account makes deposits easy to read.
- Avoid unexplained large deposits. Be ready to document anything unusual: a sale, a loan, a transfer.
- Ask your CPA for an expense letter. If your real costs are below 50%, a letter can raise your qualifying income.
- Keep the timeline in mind. A traditional loan may fit once you’ve filed returns that show more income; you can refinance into one later.
The trade-offs.
- A higher rate. Usually above a traditional loan, because the lender takes on income it can’t verify from returns.
- A larger down payment. The low-down-payment options of conventional and FHA loans generally aren’t available.
- Prepayment penalties on rentals. Loans on a home you live in generally can’t carry one, but investment-property programs often do; ask before you sign.
- Lender-by-lender rules. Expense factors, ownership and statement rules vary, which is why comparing lenders matters.
Bank statement loan or traditional loan?
| Bank statement loan | Traditional loan | |
|---|---|---|
| Income shown by | 12 or 24 months of deposits | Two years of tax returns, usually |
| Write-offs | Don’t lower your income the same way | Lower your qualifying income |
| Down payment | Often 10–20% | Can be lower |
| Rate | Usually higher | Usually lower |
| Best when | Returns understate your income | Returns show enough income |
How we get started.
Tell me about your business
How you’re paid, how long you’ve been in business, and what you’re buying or refinancing.
I check both paths
Your returns for a traditional loan, and your statements for a bank statement or other program.
Apply with the best fit
The lender reviews your statements, credit, assets and the property.
Close
And if your returns improve later, we can look at refinancing.
Self-employed loans, answered plainly.
How hard is it to get a mortgage if you’re self-employed?
Harder with a traditional loan when your returns show low income after write-offs; much easier with a bank statement or similar program that looks at your deposits instead.
Can I get a mortgage with just bank statements?
Yes. Bank statement loans qualify you on 12 or 24 months of personal or business statements instead of tax returns. Lenders still check your credit, assets and the property.
What is a bank statement loan?
A non-QM mortgage that works out your income from bank deposits, after an expense factor for business statements, instead of from tax returns. See how it works.
Do bank statement loans require 20% down?
Not always; 10–20% is common, depending on credit, the property and the lender. See also: Bank statement income calculator.
What credit score do I need for a bank statement loan?
Many lenders start around 620–700, with better pricing above that. See also: Bank statement income calculator.
Personal or business bank statements: which should I use?
Whichever shows your income more clearly. Business statements have an expense factor applied; personal statements count eligible deposits. I can run both. See also: Bank statement income calculator.
Which lenders offer bank statement loans?
Mostly specialist non-QM lenders and some banks and credit unions. Comparing several is how you find the best rate for your file. See also: Bank statement vs profit and loss loans.
Can I move to a traditional loan later?
Yes. Once your filed returns show enough income, refinancing into a traditional loan can lower your rate.
Can I get a mortgage if I’m self-employed?
Yes. With two years of tax returns that show enough income, most traditional loans work; when write-offs lower your taxable income, bank statement and profit and loss programs qualify you on deposits or profit instead.
Is it harder to buy a house if you are self-employed?
A little more paperwork, and lenders average your income over two years, so a drop in the latest year counts against you. Planning a year ahead with your CPA makes the biggest difference. See also: Self-employed income calculator.
Who is the best mortgage lender for self-employed borrowers?
The one whose rules fit how you’re paid: some count add-backs more generously, some take 12 months of bank statements, some 24. As a broker I compare them for your file. See also: Bank statement vs profit and loss loans.
What do loan officers look for in bank statements?
Regular deposits that match the income you’ve stated, large deposits that need a paper trail, transfers between your own accounts (not counted as income), overdrafts, and enough money left for the down payment, closing costs and reserves. For a bank statement loan, business deposits are averaged and an expense factor applied.
DSCR & investor
Foreign national & ITIN
Second mortgage & HELOC
Cash-out refinance