Why lenders ask for two years
Two years of returns let underwriters average your income and confirm it is stable or rising. A single year leaves them guessing whether the income is a fluke. That is the entire logic, and non-QM programs answer it differently: instead of tax history, they verify income through bank deposits, profit-and-loss statements, or asset balances.
Bank statement loans: the main alternative
Bank statement programs qualify self-employed borrowers on 12 or 24 months of bank deposits instead of tax returns. With 12 months of statements showing consistent deposits, many borrowers qualify with no tax returns at all. Lenders apply an expense factor (often 50%) to deposits to estimate net income, unless your CPA provides an expense-ratio letter documenting lower actual expenses.
This is the most common path for business owners in year one or two, freelancers with growing income, and anyone whose write-offs make their tax returns understate real cash flow.
P&L-only and 1099 programs
Some lenders offer P&L-only programs where a CPA-prepared profit-and-loss statement replaces both tax returns and bank statements. 1099 programs work similarly for contractors and gig workers, using 1099 forms plus bank statements to establish income. These are narrower programs with fewer lenders, but they exist for exactly this situation.
When waiting is actually the right call
Sometimes the math favors patience. If your business is growing fast, a second year of returns showing higher income could unlock conventional pricing, which is meaningfully cheaper than non-QM. Run both scenarios: the cost of waiting (rent paid, price appreciation) against the rate difference. If you need the home now, bank statement pricing is a known cost; if you can wait 6 to 12 months, conventional may be worth it.
Programs that fit this situation
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.
Asset Depletion Loans
An asset depletion (asset utilization) loan converts your liquid assets into a monthly qualifying income, typically by dividing eligible assets by a set number of months, so retirees and investors with savings but little paycheck can qualify..
FAQ
Can I get a mortgage with only one year of tax returns?
Conventional loans generally require two years, but bank statement loans can qualify you with 12 months of bank statements and no tax returns at all. P&L-only programs are another path with a CPA-prepared profit and loss statement.
What is a bank statement loan?
A non-QM mortgage that verifies income through 12 or 24 months of bank deposits instead of tax returns. The lender applies an expense factor to deposits to estimate qualifying income. It is designed for self-employed borrowers whose tax returns understate real cash flow.
Do 1099 workers need two years of tax returns?
For conventional loans, usually yes. But 1099-specific non-QM programs use your 1099 forms plus bank statements, which helps contractors and gig workers with shorter histories.
Is a P&L-only loan real?
Yes, though fewer lenders offer it. A CPA-prepared profit-and-loss statement covering 12 months can replace tax returns entirely at some non-QM lenders. The CPA must be licensed and the P&L must meet the lender’s format requirements.
Should I wait until I have two years of returns?
Compare the costs. Waiting may unlock cheaper conventional pricing, but you pay rent meanwhile and home prices may rise. If you need to buy now, bank statement pricing is a known, finite cost. A loan officer can model both paths with your numbers.
What credit score do I need for a bank statement loan?
Most bank statement programs start around 620, with better pricing at 680 and above. Requirements vary by lender, and larger loan amounts typically need higher scores and bigger down payments.