Common challenges
Write-offs that lower your taxes also lower the income a conventional lender can use. Two years of returns showing $45,000 can sink a borrower whose business deposits $200,000 a year.
Programs that fit
Bank Statement Loans
A bank statement loan is a non-QM mortgage that calculates self-employed income from 12 or 24 months of personal or business bank deposits instead of tax returns.
P&L-Only Loans
A P&L-only loan qualifies a self-employed borrower using a 12- or 24-month profit and loss statement prepared or signed by a CPA, EA or licensed tax preparer, with no tax returns.
1099 Loans
A 1099 loan qualifies independent contractors using their 1099 forms (and sometimes a small expense factor) instead of full tax returns, so write-offs on Schedule C do not shrink your qualifying income..
Conventional Loans
A conventional loan is a mortgage not insured by the government that follows Fannie Mae or Freddie Mac guidelines.
DSCR Loans
A DSCR loan is an investment-property mortgage that qualifies you on the property’s rental income divided by its monthly payment (the debt service coverage ratio).
Tips before you apply
- Keep business and personal accounts separate for 12–24 months before applying.
- Ask your CPA for an expense-ratio letter; it can lower the 50% default expense factor.
- Avoid large unexplained cash deposits; each one needs a paper trail.
FAQ
What is the best mortgage for self-employed borrowers?
It depends on your documentation and goal. The programs that most often fit are Bank Statement Loans, P&L-Only Loans, 1099 Loans, Conventional Loans, DSCR Loans.