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self employed bike repair manAnyone who’s been self-employed knows you don’t just sit around eating cheese balls and watching soap operas every day. You work your tail off to put food on the table and make a living. You can even make a really good one.

Because you’re not employed by a traditional business, there’s some additional documentation required to qualify for a mortgage. It doesn’t have to be a hindrance; it just requires a little preparation.

Employment Verification

One of the great draws of self-employment is the ability to strike out on your own and be your own boss. Taking responsibility for your own success can be very freeing.

It does, however make the process of verifying your employment a little different. What would normally require a phone call to your employer instead requires you to furnish a little bit of paperwork. The good news is you can provide any of the following as documentation:

  • Current statement of bond insurance (policy must be at least two years old)
  • A letter from your licensed CPA, enrolled agent or tax preparer
  • Letters from clients indicating service has been performed
  • A membership letter from a professional organization that can verify through your membership at least two years of self-employment.
  • Any state license and business license that may be required in your profession
  • Evidence of workers’ compensation and employer’s liability insurance
  • A DBA (Doing Business As) issued at least two years ago

If you’re using a DBA for verification, you must prove current self-employment with two months of recent business account statements, creditor statements or company invoices.

Income Documentation

Quicken Loans Mortgage Banker Dennis Spensley said one of the most important things a client can do to move the process along is to have income documentation ready at the beginning.

He went over what documents are needed if you’re a sole proprietor.

“When I am helping a self-employed client, I try to set the right expectation upfront,” Spensley said. “We’ll need two years of tax returns, both business and personal. We also typically need to have the client’s accountant prepare a (year-to-date) profit and loss and a balance sheet. If they have extended (their tax filing time) for the previous year, we’ll need a copy of the extension form and a profit and loss prepared for the previous year as well.”

If you’ve been self-employed for less than two years, it may be necessary to show additional documentation regarding the likelihood of continued income.

While the specific forms necessary are dependent on how you incorporate your business, in general, we’ll need personal tax returns (and, if it’s a corporation, W-2s) as well as a statement showing your portion of the business’s profit or loss. Profit and loss forms might include a Schedule C, Form 1120S or K-1, depending on your business structure.

It’s important to note that you generally can’t qualify if you show an income decline of greater than 25%.

Get Organized

Spensley also noted it’s helpful if you can separate your business assets from your personal assets.

“Self-employed clients typically have their business and personal assets intermingled,” he said. “If they can keep the funds that they will use for down payment and settlement fees isolated from their business assets in a personal savings account, that would work best.”

Depending on the type of loan, a minimum contribution to the down payment is required from your personal funds. Separating it from your business accounts will just make things easier.

Still have questions? Drop us a line in the comments section. Then get started on your home loan today!

This Post Has 59 Comments

  1. Could someone explain to me whether a 7-year employee of a professional corporation is considered self-employed upon buying a 5% (obviously minority and non-controlling) interest in the entity (a corporation), if they also remain a W2 at-will employee with an annual salary. If regulations or laws could be cited, that would also greatly be appreciated.

    1. Hi EDC:

      I’m not a lawyer and wouldn’t want to comment on laws. What I can tell you is that the major mortgage investors that we work with consider you self-employed if you have 25% ownership in a business. That’s not the case here. Depending on the type of loan you’re getting, the income or loss from that ownership stake may be treated differently. I recommend speaking with one of our Home Loan Experts at (888) 980-6716 to go over the specifics of your situation.

  2. I have a photography business now for about 1yr half. I filed my taxes with this business for my 2019 taxes. I do have a P&L sheet I track. I do not have a DBA or license since it was a small gig that is now growing. What would I need to get approved for a home loan ? Would the P&L sheet with my taxes be sufficient?

    Thanks
    Ienn

    1. Hi Jenn:

      Thanks for reaching out and asking. Your P&L sheet is going to be necessary along with your 2019 tax returns, so you’re on the right track there. Due to business conditions caused by COVID-19, we are also requiring that self-employed clients be able to show that they could make 6 months’ worth of mortgage payments with their current assets. I’m going to recommend you speak with one of our Home Loan Experts at (888) 980-6716. Have a good day!

  3. Hello, I am self-employed for only 1 year. Previously I was working in this same restaurant part time which belonged to my father. My W2 wage from last year was significantly less than my AGI this year (around 70k less). Can I still get approved?

    1. Hi Edith:

      It does help that you’re in the same field and that your gross income is higher, but we would also need to take a look at your information because every situation is different. I’m going to suggest you speak with one of our home loan experts by calling (888) 980-6716. They would be able to thoroughly look into your situation and give you a definitive advice.

      Thanks,
      Kevin

  4. I am looking to purchase for the first time. I own a business (LLC) since 2011. My type of work is mainly not subject to taxes so my net income is minimal (for 2016, the K1 total is about $14k). My gross receipts was about 138k. I do have a dba which accounts for about 50% of the gross receipts. I have been informed by other lenders that I will never be able to qualify for a loan because my net taxable is not high enough. I heard Quicken loans treat self employed like W2 income. If that is true, how is the business income calculated for qualification purposes?

    1. Hi Joanne:

      We rely on a variety of documents, especially when it comes to self-employment. Every situation is different and I couldn’t tell you in the comments what documents would be needed in your case. I’m going to recommend you speak with one of our Home Loan Experts by filling out this form or calling (888) 980-6716. We’ll be sure to go over any and all options you may have.

      Thanks,
      Kevin Graham

  5. I’m self employed and in the process of purchasing a home. I haven’t got through the underwriting process yet but my credit card company closed my account and 2 of my credit cards have been maxed out. do you think I can still get a mortgage?? just alot has happened since I first applied for a mortgage

    1. Hi Tasha:

      I can tell you that those things don’t help your chances for approval. If you give us a call at (888) 728-4702, maybe there’s some advice we can give to help you get on the right track. I think you really need to talk to someone about this and maybe we can point you in the right direction.

      Thanks,
      Kevin Graham

  6. Everyone is wasting their time here. Quickens was quick to want my 2 years of tax returns and then quickly dismiss me. I am 21 years sole proprietor, have owned my home 14 years and just wanted to refinance for a lower interest rate. I have never been late on a payment and my credit score is 840. None of this matters to the banks. I have 2 different friends that have filed bankruptcy in the past 7years and both now own homes with interest rates at 4 percent or below and here I sit at 6 percent. The system is incredibly flawed and paying bills/being responsible gets you no where.

    1. Hi Lou:

      I’m sorry you’ve had this experience. I’m going to forward this to our client relations team to look into your situation and see if there’s anything we can do to get this turned around for you. I can assure you we value every client.

      Thanks,
      Kevin Graham

  7. Hello I’m self employed( over 2yrs) and I would like to make my first purchase. My credit score is around 730. I have 3cc with balances but they are being paid down. I also have a car payment but less than 10months left along with student loans. I have one late payment that is over 3 years old.

    I’ve spoken to several loan officers but they don’t have much experience with self employed. I was attempting to see how much money could I qualify for .
    My 2015 wages were 61xxx and after write offs I was left with 51,879. Projected 2016 per CPA wages 78,xxx with standard deductions leaving appro. 65,xxx. Should I apply for a mortgage since homes are priced higher in my area? Or Should I work a few more years before applying? I do have approx 15k for downpayment. To apply for a decent mortgage if 250k is tgat possible.

    1. Hi SC:

      We do all sorts of loans, including working with people like yourself that are self-employed. Experience won’t be an issue.

      In terms of your actual loan options, I think the best way for you to get advice would be to just talk to one of our licensed Home Loan Experts who can really go over your situation in detail. You can get in touch with them by filling out this form or calling (888) 728-4702.

      Thanks,
      Kevin Graham

  8. My soon to be ex-husband is applying for a mortgage while in the midst of selling our business, closing of the sale of the business is scheduled for October. He plans to use a portion of the gain proceeds for a down payment on a house (20%). He doesn’t have a new business purchased yet, and likely will not for a few months, and therefore no income. Can he get a mortgage without future income? Just wondering. Thank you!

  9. My soon to be ex-husband is applying for a mortgage while in the midst of selling our business, closing scheduled for October. He plans to use a portion of the proceeds for a down payment on a house (20%). He doesn’t have a new business purchased yet, and likely will not for a few months, and therefore no income. Can he get a mortgage without proof of future income? Just wondering. Thank you!

    1. Hi Patty:

      With questions of self-employment, really every situation is different. It’s best if you talk to one of the Home Loan Experts to get personalized advice. You can get started by filling out this form or calling (888) 728-4702. Thanks for reaching out!

      Kevin Graham

  10. I have a question no one seems to be able to answer. My husband is self employed and started his business July 2015. We filed our taxes last year half as 1099 and half a w2 employee. Now the question.. when applying for a loan we were told 2 years self employment using our tax returns. Does this mean 24 months of self employment history, 2 years filed irs returns or BOTH? It’s a given we arnt going to apply for a loan until our 2016 taxes are filed but we don’t know if we have to wait for that 24 month mark to apply or if being a few months shy of 24 months of starting the business is going to nip us in the butt and we are denied. Technically it is 2 years returns but 18 months of actual work history. The tricky part is he has been in the same industry for 12 years just a different division.

    1. Hi Danielle:

      The reason you haven’t been given a concrete answer by anyone is that everyone’s situation is different. Depending on the loan program and your unique situation we may be able to qualify you with one year of business returns rather than two. It just depends. I think the best thing to do is to talk to one of our Home Loan Experts about your situation and see what your next steps might be. You can do that by filling out this form or calling (888) 728-4702.

      Thanks,
      Kevin Graham

  11. Im self employed, and I started going through a company called NACA. However, it appears that we aren’t getting anywhere bc the loan officer is super booked. I currently have a 690 mid score with 5% cash down payment. I have 2 year of tax returns with income increase. My DTI shows about 18%DTI. However, I have one credit card with high utlization of 80%. I’ve paid all of my bills ontime for the last 2 yrs; however, my credit report reflects one late payment and a charge off which occurred over 3 years ago. Should I pay off the collection?

    On top of that, I’ve intermingled my business and personal account together for years… Would that keep me from obtaining a construction to perm loan on my own property that is pay for?

    1. Hi Meka:

      Unfortunately, we don’t do construction loans, so I can only tell you so much. As far as the credit piece, it wouldn’t hurt to pay off your collection as it would definitely up your score. I’m not sure about the policies of the company you’re going through, so I’m not sure if you would need to do as a requirement of closing the loan.

      If you intermingle business and personal accounts, things might get a little complicated, but I would talk to your loan officer and see how they want you to proceed.

      Thanks,
      Kevin Graham

  12. Hi, I’m seeing ALOT of the same things I’ve heard. I’ve been self employed for over 3 yrs, show about the same income for last 2 yrs, I was basically informed by more than one lender that I had to “play the game” Wich is lie on my returns and claim I made more than I did (take less deductions and put it in the income), thus leaving me liable to pay taxes on my legitimate deductions. Folks I’ll sum it up, you CANNOT be helped unless you cave and eat your operating costs and pay tax on it! Was also told if I quit the business and show 4 check stubs I’d be immediately qualified! ! By the way, score is 768, no loans, no payments, minimal credit card debt… NO home ownership for self employed in AMERICA!!

    1. Hi Bill:

      You definitely don’t want to lie on your returns. I understand that you’re frustrated, and getting a mortgage while self-employed is certainly a bit more complicated. That being said, we would love to take a look at your situation and see if we have any options for you. We do everything we can to work with our self-employed clients and get them into homes. If you could fill out this form or call 888-728-4702, we can put you in touch with a mortgage banker they can take a second look at where you stand.

      Thanks,
      Kevin Graham

    2. 100% correct! Don’t waste your time unless you have a ton of cash and at that point you might as well buy it outright. Bottom line …..that taxable income on your return is all they want to see. Only interest is in inflows…they don’t care if you have been paying rent for 10 years that equals the same as your mortgage payment. My employees can get a mortgage but I can’t.

      1. Hi Jim:

        It’s true that there are some different challenges in terms of documentation when you’re self employed. However, I wouldn’t paint with such a broad brush that you automatically think you can’t qualify for a mortgage without talking to someone. I suggest speaking with one of our Home Loan Experts and going from there. You can do that by filling out this form or calling (888) 728-4702.

  13. Hello – I have been self employed since 2004. I currently have my mortgage with US Bank (which I have had for 8 years or so). I make my payments on time (often with extra principle). My credit score is 820. I recently applied for a refinance in an attempt to lower my monthly payment, go from a 30 year loan to a 20 year loan, lower my interest rate. I was denied by US Bank with the explanation of Income Debt Ratio. I understand that self-employment loans are tricky to approve, but this is a company that I have an established relationship with, they already own my existing mortgage that I have proven my ability to pay on time. My new refinance would lower my payment. I don’t understand why they won’t approve a refi when I can clearly make the payments based on my current payment. Any thoughts or suggestions?

    1. Hi Gina:

      The best explanation I think I can give you is that a lot of the time the bank sells your mortgage to someone like Freddie Mac, Fannie Mae or the FHA. They do this to more immediately gain capital they need to make other loans. They may keep the servicing rights in which case you would still get the bill from them. However, when your mortgage is sold to these other entities, they tend to have very strict guidelines regarding what your debt-to-income (DTI) ratio can be and as you said, income can be hard to prove. That said, we can definitely help you take a second look. We can put you in contact with a mortgage banker if you fill out this form or call 888-728-4702.

      Thanks,
      Kevin Graham

  14. I have just been through the gauntlet trying to get refinance an existing loan.
    I have 825 credit and perfect everything!

    The problem lies mostly CFPB, they are here to protect us from ourselves!
    A qualifying loan currently only considers income!
    It does not consider savings of any type, other property or assets you may have!
    If it’s not income it may even count against you!
    Some ignorant Government workers wrote these rules!
    Not the banks but they must follow them or they get in trouble!
    So we have the Government we deserve!
    My only advice is to save up and pay cash!
    It’s sad but true!
    It is much easier to get a business loan or credit than a mortgage if you own your own company!
    It’s crazy and it’s not the banks fault, they can’t tell you that, I can!
    Call Congress and give them a piece of your mind!
    Keep minimizing your taxes!
    Take advantage of what you have!
    Get the money through the business side, not the personal side!
    Good luck!

    1. Hi Steve:

      I sympathize with your frustration, however I can assure you that one approval is based on a variety of factors including income, property type, assets (including savings) and credit.

      Thanks,
      Kevin Graham

  15. We are running into some similar issues. We got pre approved over the phone but when it came to providing out tax returns we were rejected out to lack of income. We are self employed company that make enough money. There were write offs and deductions that led to an amount that they did not approve of. We ended getting less than the amount we asked for. Is there any way we can do to get around this?

    1. Hi Susan:

      Unfortunately, there’s not a way around providing two years of personal tax returns. Depending on the loan program and the circumstances, you may not have to provide two years of business tax returns. If you’d like, we can have someone talk to you if you fill out this form. We can take a second look.

  16. Hello, my husband and I are recently self employed and we are trying to get a mortgage and have been denied due to not having two years of income tax filed. All of our monthly bills are paid on time and besides students loans our debt is minimal or non existance. Our credit score is 800+. Are we not going to be able to get a mortgage loan.

    1. Hi Veronica:

      Unfortunately, there’s really no way of getting around having two years of tax returns. At least with the personal tax return. Sometimes you don’t have to provide two years of business returns, but it depends. I wish I could tell you different. If you like, you can speak to one of our mortgage bankers and we’d be happy to look into your situation.

      Thanks,
      Kevin Graham

  17. It’s crazy that a mortgage company makes it so hard to give a business owner a home loan because of business stability when I could just go get a job with a company that’s about to go bankrupt, yet get a mortgage after being employed there for a week. What a joke. Isnt the American Dream to own a business and a home. Seems like when u own a business, you can’t own a home too without jumping through hoops. Screw sallie Mae and all there legalities. I’ll just save my cash and buy a house like that so you mortgage companies don’t make any money off me. Obviously my money’s not good enough for you anyway. Thanks 👍🏻

    1. Hi Tom:

      I’m sorry to hear you feel this way. I can pass this along and have someone reach out and see if there’s anything we can do to get this turned around and get you into a loan. What I can tell you is that getting a mortgage when self-employed does present its own challenges, but we do our best to look into all possible options for every client.

      Thanks,
      Kevin Graham

  18. My husband has been self employed for 20 years and we were just told that he cannot exclude his auto loan payment from qualifying for a mortgage loan, i.e. debt to ratio, because he hasn’t had the auto loan for more than 12 months. The reason he hasn’t had the auto loan for more than 12 months is due to purchasing a new vehicle, so the loan is now with a new bank. Is this true?

    1. Hi Michelle:

      Applying for new debt like a new car can have an effect on your debt-to-income (DTI) ratio. I’m going to have someone reach out that can go over this in further depth and look at any options you may have.

      Thanks,
      Kevin Graham

    1. Hi John:

      We can definitely help you look into all your options. I’m going to have someone reach out. Happy Father’s Day!

      Thanks,
      Kevin Graham

  19. I am seeing a LOT of the same sorts of situations and NO answers or solutions being posted. That is pathetic. The self employed are punished and made to feel almost as if we are criminals. There seems to be no hope for us who struggle and fight to INSURE we survive. What a cruel world is this that we live? Talk about discrimination? This “mortage lending” to the self employed little guy knows no boundaries. The CONSTANT rejection with the same CANNED excuses…SORRY you don’t qualify, is despicable!

    1. Hi Sam:

      I understand your frustration. Getting a mortgage when self-employed does require some different documentation. I’m going to have someone reach out to help look your options. It’s impossible to give you any proper advice in the comments section without knowing more about your situation. In order to give our clients service that’s as personal to them as possible, we try to put them in touch with one of our Home Loan Experts. Someone will be reaching out to you.

      Thanks,
      Kevin Graham

  20. My fiance and I are self employed and have a home we want to buy, we have been turned down for loans because of write offs.we need to get a loan quickly do we don’t have to pass on the house. Can we be helped with this?

  21. We have been self employed for over ten years and no one will lend us anything. We bought our house when the market was down and the owner took back a note with a balloon. We thought that making payments for 7 years with never a late payment (we make the payments to his bank, so there is a record), taxes always paid on time, decent credit, increased income every year, would help us. No one even takes that into account because of our tax write offs. We thought there would be a lender or there who knew the difference between actual income and adjusted. Our expenses are our income! Now we don’t have time to file two years of returns with a higher adjusted gross like all the websites suggest, and we used our savings to buy the house and make improvements so the value would be greater. And now we have to sell a house we want and have demonstrated we can afford or be foreclosed on. You would think someone would be glad to lend to owners who want to refinance with the history we have. Be careful what you get into. The discrimination against hard working people who can think outside the box is disheartening.

    1. Hi Kathleen:

      Every situation is different and there is some different documentation required if you’re self-employed. However, we would be happy to look into your situation and see if there’s anything we have to offer you. Someone will be reaching out.

      Thanks,
      Kevin Graham

        1. Hi Beth:

          It’s our policy not to comment on the resolution of client issues for the privacy of our clients. Many client questions involve very personal details about their financial situation. What I can tell you is that we do our best to thoroughly look into each client situation and offer any options or advice we have to leave the client in the best position possible moving forward. Please don’t hesitate to reach out to us in the future if you have any questions or concerns.

          Thanks,
          Kevin Graham

  22. Quicken Loans® is a joke! We are self-employed and they said we qualified, our loan was a “done” deal. Then when they found out our down payment was transferred from our business checking to our personal savings they wouldn’t accept it for our down payment. Supposedly this is common, not accepting down payment from a business account, it’s considered a “loan” from the company-eye roll. How else are we suppose to give ourselves a “paycheck” if its not from our business account? Anyway, I wanted to mention this since every reply on here from a Quicken employ makes it sound like they are different from other lending institutions and are willing to work with the self-employed. Simply not true.

    1. Hi Izzy:

      I’m sorry to hear about your poor experience with us. We do loans for the self-employed, but every situation is different. We are currently looking into this and I’m going to have someone reach out to you.

      Thanks,
      Kevin Graham

  23. Home buying when you are self employed has always been unfair as we are to be qualified or disqualified based upon our ADJUSTED gross income after write offs, taxes and expenses, whereas, a regular salaried employee is given the consideration of counting their income before taxes and before expenses. Not fair but it’s all we have to work with…. So….

    One thing to think about is finding a lender that specializes in self employed individuals. I’m still on the hunt for one. From what I understand, there are lenders that know the rules about adding back certain expenses that your company pays directly for with a company check. For example, in our case, we are a sole proprietorship, so we pay everything out of the company bank account, house, personal and business cards, utilities, etc. However, when applying for a mortgage, the lender takes your gross adjusted income that already took those expenses into consideration, then again, deducts those same expenses and counts them against you. Not an ideal situation but it’s what happens, therefore, you cannot afford anything in their eyes.

    In our case, our adjusted gross income is “cream” for us since the company pays ALL personal and business expenses already accounted for in taxes, yet it is still not enough to afford a second home… no matter what the amount. crazy.

    1. Hi Sarah:

      While there are certain requirements we have to follow in qualifying clients, we do try our best to find a solution for the consumer. Every situation is different, but I’m going to have someone look into this for you.

      Thanks,
      Kevin

  24. Hello, My husband and I are self employed through our general contracting company. We are trying to get a mortgage and have been denied due to debt to income because of last year our company showed a “paper loss”. Our monthly bills are paid on time, we both pull salaries from the company, our scores 740+ and our true debt to income without business loss is minimal. Are we doomed to never be able to get a mortgage? Why are self-employed people discriminated against? We could both work for the exact same company elsewhere, be approved and lose our jobs the day after closing. Owning your own business puts you in control of staying in business and most people will work 24 hours a day to remain in such. We are feeling very helpless right now…can you help?

    1. Hi Wendy:

      While there are income documentation requirements for those that are self-employed, we do our best to find solutions. Every situation is different, but I’m happy to have a Home Loan Expert reach out and look into your situation. At the very least, we should be able to give you solid advice.

      Thanks,
      Kevin Graham

  25. I am an OTR trucker, I’ve been an owner operator since 2004. My current home is far too small for my family and we need a larger home. As you stated above, my income tax returns don’t reflect my true income because of allowed deductions. My wife also works full time and we both have credit scores in the 700’s. I’m tired of people telling me that I don’t make enough money and slamming doors in my face. PLEASE HELP!!!!

    1. Hi Ben:

      Every situation is different, but we’d be happy to help you look into your options. Someone will be reaching out.

      Thanks,
      Kevin Graham

    2. With trucking you can add back in your days out per log book and any depreciation on your equip that has been deducted towards total income. In our business these are hugh!

  26. Why is everything so difficult for the self-employed person? Taxes are ridiculous and I’m starting to think it will be faster and easier to save up to pay cash for a home. I would never have been able to afford a home working for someone else. My income is just as steady as if I had someone doling out a pittance every 2 weeks, but so much more. It’s frustrating but makes me want to sell even more so I can just pay cash then. Inspiration.

    1. Hi Anita:

      Everyone has to show documentation to get a mortgage. The documentation is just different if you’re self-employed. Every situation is different in terms of what information is necessary to get a mortgage. We try to make the process as easy as possible. I’m going to have someone reach out to see if we can help you pass the sticking point you are hitting.

  27. I applied for a loan and i am an independent insurance agent with income verification for 7 years with the same company. My 1099 statement shows 60k a year but after a profit and loss statement submittal on my scedule c I only show income of 24k a year average for the last 2 years. Income has been consitant and has increased by 10% every year. My bills are well over the 2k a month the mortgage company says i make. We have been denied at this point for lack of income. Please help is there anything i can do. If this is the case we will never qualify for a loan unless i overpay my taxes.

    1. Hello, Nick. We’d be happy to look into your situation more. I’m to have one of our home loan experts reach out to you. Have a nice week.

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