A Complete Guide to U.S. Real Estate Loan Programs for Self-Employed & 1099 Freelancers

 

 

 

 

 

 

 

 

For self-employed individuals or 1099 freelancers who are not W-2 employees, it is common to deduct many business expenses (write-offs) when filing taxes. As a result, even with strong actual income, taxable income often appears low on tax returns.

 

 

Because of this, many borrowers face challenges qualifying for conventional mortgages. However, there are several alternative loan programs available even in these situations.

 

 

Below is a summary of major loan programs that self-employed borrowers and 1099 freelancers can use in the U.S. for home purchase, refinance,  home equity financing and owner-occupied commercial property.

 

 

 

 

1️⃣ Conventional Mortgage –  Full Documentation Loan

 

Required Documents

            • Personal and business tax returns for the most recent 1–2 years

Down Payment

            • As low as 3% with sufficient qualifying income

            • PMI required if down payment is under 20%

Pros

            • Lowest interest rates

            • Most common and stable loan option

Cons

            • Lower approval amount or possible denial if reported taxable income is low

Use

            • Purchase / Refinance / Home Equity

Best For

            • Borrowers who report sufficient income on tax returns

 

 

 

 

 

 

2️⃣ Bank Statement Loan

 

Required Documents

            • No tax returns required

            • Most recent 12 or 24 months of personal or business bank statements

Down Payment

            • Minimum 10%

Pros

            • Income is calculated based on actual deposit cash flow, even if tax-reported income is low

Cons

            • Interest rates are higher than conventional loans

Use

            • Purchase / Refinance / Home Equity

Best For

            • Borrowers with strong cash flow but low reported taxable income

 

 

 

 

 

3️⃣ Profit & Loss (P&L) Only Loan

 

Required Documents

              • A CPA-prepared and signed 12-month Profit & Loss statement

Down Payment

              • 10% – 20%

Pros

              • No tax returns or bank statements required

Cons

              • Higher interest rates than conventional loans

Use

              • Purchase / Refinance / Home Equity

Best For

              • Stable businesses with CPA support

 

 

 

 

 

4️⃣ Investment Property Mortgage – DSCR Loan

 

Required Documents

            • No personal income documentation

            • Approval based on Debt Service Coverage Ratio (DSCR) using rental income

Down Payment

            • 15% – 25%

Pros

            • Personal income not considered

            • Fast closings available (as fast as 5 days for some programs)

Cons

            • For investment properties only (not owner-occupied)

Use

            • Purchase / Refinance / Home Equity

Best For

            • Self-employed borrowers purchasing rental properties

 

 

 

 

 

5️⃣ Government-Backed Loan:  FHA Loan (Low Credit & Low Down Payment)

 

Required Documents

            • Most recent 2 years of tax returns

            • W-2 or Schedule C

            • Minimum credit score 500

Pros

            • Low down payment options:

                  • 3.5% down with credit score 580+

                  • 10% down with credit score 500–579

            • Flexible underwriting guidelines

Cons

            • Mortgage Insurance Premium (MIP) required

            • Subject to FHA loan limits by area

Best For

        • First-time homebuyers with limited down payment and/or lower credit

 

 

 

 

 

6️⃣ Commercial Real Estate (Owner-Occupied) – SBA Mortgage

 

Required Documents

            • Business tax returns for the most recent 2–3 years

            • Additional SBA-required documentation

Loan Amount

            • Up to $5,000,000

Pros

            • 0%–10% down payment possible

            • Long-term repayment up to 25 years

            • Opportunity to own commercial property with minimal down payment

Cons

            • Longer application and approval process

            • At least 51% of the property must be owner-occupied

Use

            • Purchase / Refinance

Best For

            • Business owners seeking both workspace and long-term investment

 

 

 

 

 

7️⃣ Home Equity Financing

 

Home Equity Loan (Second Mortgage)

            • Lump-sum payout

            • Monthly payments of principal and interest

HELOC (Home Equity Line of Credit)

            • Interest charged only on the amount used

            • Reusable credit during the draw period

            • Interest-only payment options available

            • Available as a first or second lien

Common Uses

            • Business capital

            • Education expenses

            • Debt consolidation

            • Down payment for additional real estate

Income Documentation Options

            • Tax returns

            • Business bank statements

            • Profit & Loss (P&L) statements

            • No Income Verification (highest interest rates)

 

 

Final Notes

 

We work with over 250 mortgage programs and compare options to find the best possible loan solution tailored to each client’s situation.

 

✔️ Free consultation
✔️ No-obligation pre-approval available

 

 

 

 

Terry Kwon

Contact: (631) 624-4480

Email: terry@milestonepointinc.com

 

Funding Director at Milestone Point, Inc.

Licensed Mortgage Originator at Loan Factory

NMLS #2620208

Loan Factory NMLS #320841