How to Qualify for a Home Loan When You’re Self-Employed

The process for getting a mortgage when you’re self-employed isn’t the same as it is for someone with a traditional job, but it’s definitely doable. 

We’ll go over self-employed mortgage requirements so you can get a better idea of what you’ll need to qualify and what your mortgage options are, whether you’re a dentist, a freelancer, a real estate agent, or something else.

Understanding self-employment in the context of home loans

More than 9.2 million people, or nearly 6% of workers in the U.S., are self-employed, according to December 2024 data from the U.S. Bureau of Labor Statistics. The true number of self-employed could be even higher.

If you’re one of the millions of people bringing in an income and covering your own business expenses that can complicate a home loan application. 

Mortgage lenders want to know if you can repay the loan. For people with a traditional job, the lender can look at pay stubs and tax returns to see how much they earn. But when you’re self-employed, it’s not that simple. You’ll need to show the mortgage lender that your self-employment earnings can support a mortgage payment as well as your other expenses. 

“Self-employed borrowers tend to write off a lot on [tax] returns to make their income seem lower,” says Mona Wong, a Massachusetts-based loan officer at Monument Mortgage. “It’s great for taxes, not for lending.” 

Carlos Betancourt, an account executive at Luxury Mortgage, has worked with many self-employed borrowers over his 26-year career. “They will fully take advantage of the tax breaks, but unfortunately, that kind of puts them at a disadvantage,” he says. “We know they’re good clients, but when you see it on paper, it just doesn’t show.” 

Fortunately, there are plenty of other ways to show a mortgage lender that your self-employment income can support a mortgage payment, even after deductions. “We don’t look at the tax returns,” Betancourt says. “That’s between you and Uncle Sam.” 

Eligibility requirements for self-employed home loans

As with any mortgage application, you’ll need to show the lender that you have the ability to repay the loan. Qualifying for a mortgage when self-employed means demonstrating:

• A steady income
• What kind of business you have
• How strong the business is
• Whether your business is likely to keep bringing in enough money to cover your mortgage payments comfortably

For homebuyers with a traditional job, the mortgage underwriting process might lean heavily on computer algorithms. But when you’re self-employed, qualifying for a mortgage often requires more hands-on attention from the lender. Your lender may want to see proof you’ve met your industry’s licensing requirements, or that you have the appropriate business insurances, Betancourt said. 

“We just want to make sure that we really dig deep into your financial stability,” he says. 

Necessary documentation for self-employed mortgage applicants

To determine how stable your financial situation is, your lender may want to see the following documents:

• Bank statements for business and personal accounts
• Business and personal tax returns (including all schedules)
• Business license
• Profit and loss statements
• Documentation of other income, such as rental properties
• A letter from a certified public accountant

The exact documentation you need varies depending on the type of mortgage you choose. Your lender will let you know exactly what you need to submit with your application.

“One thing to be cognizant about is if you are using funds from your business account, you may need a CPA letter stating that withdrawing funds will not have a negative impact on the business,” says Reed Letson, branch manager at Georgia-based Elevation Mortgage. You could also transfer those funds ahead of time into a personal checking or savings account.

Mortgage options available for self-employed individuals

There are many types of mortgages to choose from when you’re self-employed. Some of these options include:

• Conventional: A conventional loan conforms to Fannie Mae or Freddie Mac guidelines, and usually requires at least a 3% down payment and a credit score of 620 or higher.
• FHA loan: Loans backed by the Federal Housing Administration offer lower credit requirements than conventional loans. The minimum requirements are a down payment of 3.5% and a credit score of 580, or a down payment of 10% and a credit score of 500.
• VA loan: Veterans and service members may be eligible for loans backed by the Department of Veterans Affairs. These loans have no stated minimum credit score or down payment requirement, though lenders vary in their own criteria for qualifying.
• Non-qualified: Non-qualified mortgages are a popular mortgage option for self-employed individuals because they have more flexible requirements. Non-qualified loans can use alternative methods of verifying your income, such as bank statements. They usually require a down payment of at least 10%.
• Bank statement loan: This type of non-qualified mortgage loan uses one or two years of bank statements to verify your income. Bank statement loans can be especially helpful if you have a seasonal business or fluctuating income, because it uses a cash flow analysis to provide a more accurate snapshot of your finances than just looking at your last two bank statements.
• Asset-based loan: This is another type of non-qualified loan. It uses your liquid assets, such as investment or checking accounts, as a basis to assess your ability to repay.

Tips to improve your chances of mortgage approval

Start preparing for your new mortgage today with these tips:

Clean up your books

If you haven’t already done so, separate your business and personal finances. 

“Try to be as neat and as organized as possible with your cash flow,” Betancourt says. “Try not to bounce checks, try not to move money around so much that the underwriter can’t determine where the money is coming from. Try to run a tight ship.”

Improve your credit score

A higher credit score could help you qualify for a lower interest rate. Boost your score by paying every bill on time, and pay down any high balances on your credit cards. 

Increase your savings

Put a little more money in the bank. In addition to boosting your liquid assets, a bigger down payment can help you score lower rates. For non-qualified mortgages, for example, “your rates will really drastically improve from a 10% to a 20% down,” Betancourt says. “You’re talking about almost a 2-point rate difference.”

Add a co-borrower

If it suits your situation, adding a co-applicant or co-borrower could improve your chances. Although it’s rare, a non-occupant co-borrower — someone who is on the loan, but won’t live in the home — could be another option for certain loans.

Use a gift

Self-employed borrowers can use gift funds to help cover a more sizable down payment. This could be especially helpful for first-time homebuyers, who may not have equity in a current home to apply toward the next property, like repeat buyers do.

Explore all options

“New loan programs for self-employed consumers are coming out constantly,” Letson says. “Make sure you talk to a mortgage broker so you can have as many options as possible.”