Self-employed individuals often face unique challenges when applying for traditional mortgage financing due to variable income and complex tax filings. To address this, lenders offer specialized mortgage programs designed specifically for self-employed borrowers. These programs provide more flexible documentation requirements while ensuring responsible lending practices.
Eligible Borrowers:
Sole proprietors
Independent contractors (1099 earners)
Partners in a business
Owners of corporations or LLCs with a significant ownership interest (typically 25% or more)
Minimum Time in Business:
Typically 2 years of self-employment history
In some cases, 1 year may be accepted with previous experience in the same line of work
Full Documentation Loan (Standard Conventional Loan)
Requires two years of personal and business tax returns
May include profit & loss statements, balance sheets, and bank statements
Used when the borrower’s tax returns show sufficient income
Bank Statement Loan (Alternative Documentation)
Uses 12 to 24 months of personal or business bank statements to calculate income
Ideal for borrowers who write off significant expenses and show lower taxable income
No tax returns required
Income is determined by averaging monthly deposits
1099 Income Loan
For independent contractors receiving 1099s
Uses 12 - 24 months of 1099 forms and/or year-to-date earnings reports
No tax returns required in some cases
Profit & Loss Statement Only Loan (Less common, available with some non-QM lenders)
Based solely on a CPA-prepared profit & loss statement
May not require tax returns or bank statements
Higher credit scores and down payments often required
Asset Depletion Loan
Suitable for self-employed borrowers with substantial liquid assets
Income is calculated based on the depletion of assets over time
Used when traditional income documentation is not available or not sufficient
Conventional (Fannie Mae/Freddie Mac)
FHA (for self-employed borrowers with tax returns)
Non-QM (Non-Qualified Mortgage) loans
Jumbo loans (for high-value properties)
Loan amounts up to conforming and jumbo limits
Flexible income verification options
Competitive interest rates based on risk profile
Down payments as low as 10% (varies by program and lender)
Available for primary residences, second homes, and investment properties
Personal and/or business
Investors have several mortgage options available depending on their goals, financial situation, and the type of property they’re purchasing (residential, multi-family, or commercial). Here’s a breakdown of the main mortgage options available to real estate investors:
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