Loan options

Self-Employed Mortgage Options

Self-employed borrowers can absolutely get a mortgage; the question is which documentation path fits. If your tax returns show strong net income, a conventional loan works fine. If your returns are minimized by legitimate write-offs, a bank statement loan qualifies you on your actual deposits instead, so the income your business really generates is the income the lender counts. And if neither returns nor statements tell your story, 1099-only, P&L-only, and asset-based programs round out the shelf. This page maps the paths; the dedicated pages go deep.

The self-employed problem, in one paragraph

Conventional underwriting qualifies you on the net income from your tax returns, usually averaged over two years. Every deduction your CPA finds (vehicle, home office, depreciation, equipment) lowers that number. A contractor grossing $300,000 who nets $80,000 on paper qualifies like an $80,000 earner. Good tax strategy and good mortgage qualifying pull in opposite directions, and most self-employed borrowers only discover this when a lender declines them.

How a bank statement loan works

Instead of tax returns, the lender reviews 12 or 24 months of bank statements and derives income from your deposits:

1. Gather statements: business accounts, personal accounts, or both, depending on the program.
2. Scrub non-income deposits: transfers between your own accounts, loan proceeds, and refunds don’t count.
3. Apply an expense factor: on business accounts, lenders typically assume roughly 30%–50% of deposits go to overhead. A CPA-prepared expense statement can substitute your actual, often lower, expense ratio. Personal-account programs may count qualifying deposits at or near 100%.
4. Average it: the adjusted total divided by the months reviewed is your qualifying monthly income.

Everything else about the loan is ordinary: a full credit review, an appraisal, asset verification, and a 30–45 day timeline. Bank statement loans are a category of non-QM lending, which means each lender sets its own rules; expense factors, account types, and history requirements all vary. Ours are set by our own underwriting team, which is why we can tell you early and reliably how your deposits will count. For current program numbers (down payments from 10% with strong credit, 12 or 24 month options, and how recent credit events are handled), see the dedicated bank statement loan page.

Who qualifies

Typical benchmarks (starting points, not promises; every file is underwritten individually):

• Self-employment history: 2 years in business typically; 1 year considered by some programs with prior same-field experience
• Credit score: 620+ typically, with the best pricing above 700
• Down payment: 10% minimum on many programs; 20%+ earns meaningfully better terms
• Reserves: commonly 3–6 months of the new payment in liquid savings
• Deposit quality: consistent, explainable deposits; large unexplained spikes get questioned
• Ownership: typically 25%+ ownership of the business makes you “self-employed” in lender terms. 1099 contractors and gig workers fit here too, and some programs use 1099s alone

What it costs

• Rate: typically somewhat higher than a comparable conventional loan; the premium shrinks with credit score and down payment
• Down payment: 10%–20%, versus as little as 3%–5% conventional
• Closing costs: the usual 2%–5% of the loan amount; no special program fees in most cases
• The bridge strategy: many borrowers buy with a bank statement loan now and refinance into conventional financing after their next tax return or two, if they qualify then. Model both stages in our mortgage calculator suite

Pros and cons

Pros

• Qualifies the income your business actually produces, not the after-write-off number
• No tax returns, W-2s, or profit-and-loss gymnastics on most programs
• Works for sole proprietors, LLCs, S-corps, partnerships, contractors, and gig workers
• Loan amounts can go well past conforming limits with many non-QM lenders

Cons

• Costs more than conventional: higher rate and bigger down payment
• Expense factors can undercount income for low-overhead businesses unless you document actuals
• Messy or commingled banking makes qualification genuinely harder
• Not for W-2 employees, and if your tax returns already support the loan, conventional is the cheaper route

Bank statement loan vs. the nearest alternatives

• Conventional with strong returns: if your last two tax years net enough income, conventional wins on price. Always check this first; a good lender runs both.
• DSCR loans: buying a rental property? Qualify on the property’s rent instead of your income entirely; your tax returns and deposits never enter the file.
• Other non-QM programs: asset-depletion loans (qualify on savings), 1099-only programs, and P&L-only programs each fit specific self-employed shapes.
• Adding a W-2 co-borrower: a spouse’s documented income sometimes carries the file conventionally, keeping the self-employed income as a compensating factor rather than the qualifying basis.

How to get started with Priority Home Mortgage

Bring us the plain-English version of your business (what you do, roughly what flows through your accounts, what your returns show) and we’ll price the conventional path and the bank-statement path side by side from our own program shelf, one of the deepest non-QM lineups in the market. If tax returns get you there cheaper, we’ll say so. Start with a quick quote; self-employed files are a daily occurrence here, not a special case.

Self-Employed Mortgage Options: your questions, answered

Can self-employed people get a regular conventional mortgage?

Absolutely. Self-employment doesn't disqualify you from anything. Conventional loans use the net income on your last one to two years of tax returns, averaged. The problem is that healthy write-offs shrink that net number, so a business earning well can look modest on paper. Bank statement loans exist for exactly that gap.

How do lenders calculate income from bank statements?

They total 12 or 24 months of deposits into your business or personal accounts, remove obvious non-income items like transfers and loan proceeds, then apply an expense factor, commonly around 50% for business accounts, less for service businesses with low overhead or with a CPA letter documenting actual expenses. The result, divided by the months reviewed, is your qualifying monthly income.

Do bank statement loans cost more than conventional loans?

Typically yes: a somewhat higher rate and a larger down payment, because the lender holds more risk without agency backing. The gap narrows with strong credit and 20%+ down. Many borrowers use a bank statement loan to buy now and refinance into conventional financing after a year or two of stronger tax returns, if they qualify at that time.

I've been self-employed less than two years. Do I have options?

Sometimes. If you have at least one year of self-employment plus prior W-2 experience in the same field, some programs will consider it. Alternatives include qualifying on a co-borrower's W-2 income, waiting for a second business tax year, or an asset-based program if you have significant savings. It's file-by-file, and worth a conversation before assuming you're stuck.

Do I have to use my business bank statements, or can I use personal accounts?

Either, depending on the program. Personal-account programs typically count deposits at or near 100% if you can show the business pays you into that account, while business-account programs apply an expense factor. Clean separation of business and personal banking for 12+ months makes your file dramatically easier to approve.

Will writing off less on my taxes help me qualify for more?

For conventional loans, yes: higher net income on your returns means more buying power, at the price of a bigger tax bill. That trade-off is worth modeling with your CPA a year or two before you plan to buy. A bank statement loan sidesteps the dilemma by ignoring the tax returns entirely.