Self-Employed? Here's How to Get Approved for a Mortgage

🏠 Self-Employed? Here's How to Get Approved for a Mortgage

By South Wind Financial | Boston's Trusted Mortgage Broker

Being your own boss has plenty of perks—freedom, flexibility, and the power to grow your business on your own terms. But when it comes to qualifying for a mortgage, self-employed borrowers often hit more red tape than traditional W-2 earners.

Whether you’re a rideshare driver, contractor, consultant, realtor, or full-time entrepreneur, getting approved for a home loan is possible—with the right game plan and an experienced loan officer on your side.

Here’s what you need to know to go from self-employed to homeowner.

💼 Why Is It Harder for the Self-Employed to Get a Mortgage?

Lenders want to see reliable income and financial stability. For W-2 employees, that usually means pay stubs and job verification. But for self-employed individuals, income can vary month to month, and tax returns might not reflect what you actually earn—especially if you write off business expenses.

Here’s what lenders often consider:

• Is your income consistent year over year?

• Is your business seasonal or stable?

• Do your tax returns show enough profit?

• Are you managing debt responsibly?

📋 What Documents Will You Need as a Self-Employed Borrower?

To improve your chances of approval, have the following documents ready:

1. 2 years of personal and business tax returns (with all schedules)

2. Year-to-date profit and loss (P&L) statement

3. Business license (if applicable)

4. 3–6 months of personal and business bank statements

5. CPA letter verifying your self-employment

6. Documentation of additional income (e.g. investments, rental income)

✅ Tip: If your business is a sole proprietorship, personal and business income might be reviewed together. If you're an LLC or S Corp, lenders usually ask for separate business tax returns.

💳 How Your Tax Strategy Affects Mortgage Approval

Many self-employed borrowers maximize deductions to lower tax liability. While smart from an accounting standpoint, it can hurt you when applying for a mortgage.

💡 Why? Lenders look at net income—not gross. So if you earn $150,000 but deduct $100,000 in expenses, you’re only showing $50,000 in qualifying income.

👉 Solution: Talk with your loan officer before you file taxes to avoid writing off so much that it impacts your buying power.

🏡 Mortgage Loan Options for Self-Employed Borrowers

You’re not out of options—far from it. There are several home loan programs specifically designed with business owners and independent contractors in mind.

Here's a quick comparison of popular loan types:

Loan Type Best For Income Proof Down Payment Credit Score Needed Conventional Stable, 2+ years of returns 2 years of tax returns As low as 3% 620+ Bank Statement Variable or high write-off earners 12–24 months of bank statements 10–20% 660+ DSCR (Investors) Real estate investors Rental income only 20–25% 620–700+ Non-QM / Stated Complex income situations Alternative docs accepted 10–25% Varies FHA First-time or lower-income buyers Full tax documentation 3.5% 580+

🧑‍💼 Real Client Example: A Boston Freelancer Buys Her First Home

A recent client, a freelance UX designer based in Cambridge, had been turned down by her bank due to too many tax write-offs. Her credit was solid, her savings were strong—but her tax return didn't reflect her true income.

We reviewed 12 months of business bank statements and got her approved for a bank statement loan. She closed on a beautiful South End condo within 45 days—no tax returns required. All it took was working with a lender who understands the self-employed mindset.

💡 Pro Tips to Boost Your Approval Odds

1. Work with a loan officer who specializes in self-employed borrowers
   At LoansWithGeo.com, we know how to match non-traditional earners with the right lender and loan program.

2. Keep business and personal finances separate
   Clean financial records speed up underwriting and improve your approval odds.

3. Pay down your debt
   A lower debt-to-income ratio (DTI) = more borrowing power.

4. Boost your credit score
   Even 20–30 point improvements can open better interest rates and loan options.

5. Be ready to explain income fluctuations
   A short letter of explanation can go a long way if you had a down year or a late start.

❓ Frequently Asked Questions (FAQs)

Q: Can I qualify with only one year of self-employment?
A: Yes, but it's lender-specific. If you were previously in the same field and show strong cash flow, some lenders will approve with just one year of tax returns or bank statements.

Q: Do I need a business license?
A: Not always. Freelancers and sole proprietors may not need one. However, having a license or proof of long-term contracts can strengthen your file.

Q: Will my write-offs hurt my loan approval?
A: They can. That's why it’s best to review your tax strategy with your loan officer before filing, especially if you plan to buy soon.

Q: Can I use income from multiple businesses?
A: Yes, as long as you can document consistent income from each. Clean bookkeeping is key.

🧮 Not Sure Where You Stand? Let’s Run the Numbers.

Whether you’re self-employed full-time or run a profitable side hustle, South Wind Financial is here to help you qualify for the home you deserve.

📱 Call or Text: 617-821-1757
📧 Email: [email protected]
🌐 Apply Online: https://loanswithgeo.com
🏆 Serving self-employed borrowers across MA, RI, FL, NH, CT, TX and nationwide.