💼 A Complete Guide to Mortgage Options for Self-Employed Buyers in the U.S.

 

 

 

– What if your reported income is low or your earnings are inconsistent?

If you’re working as a self-employed professional or freelancer in the U.S. without a W-2, getting a mortgage might feel a bit more complicated compared to salaried employees. But the good news is—there are many mortgage programs specifically designed for self-employed borrowers. Here’s a summary of the most common options available when purchasing a home.

 

1️⃣ Full Doc Mortgage – Traditional Mortgage

  • Required Documents:
    2 years of tax returns (1040), Profit & Loss statement, Balance Sheet, 2 years of personal and business tax filings
  • Pros:
    Low interest rates, standard loan program
  • Cons:
    Loan amount may be limited if your reported income is low

✅ Best for:
Borrowers who fully report their income on taxes

 

2️⃣ Bank Statement Loan – Based on Bank Deposits

  • Required Documents:
    Business or personal bank statements from the past 12 or 24 months
  • Pros:
    Even with low reported income, your actual deposit history is used to calculate income
  • Cons:
    Slightly higher interest rates than traditional loans

✅ Best for:
Borrowers with strong cash flow but low taxable income

 

3️⃣ P&L Only Loan – Based on Profit & Loss Statement

  • Required Documents:
    12-month profit and loss statement prepared by a CPA
  • Pros:
    No need to provide tax returns or bank statements
  • Cons:
    Higher interest rates and limited lender availability

✅ Best for:
Borrowers with stable businesses and CPA support

 

4️⃣ DSCR Loan – For Investment Properties Only

  • Required Documents:
    Approval based on the Debt Service Coverage Ratio (DSCR), which compares rental income to mortgage expenses
  • Pros:
    No income documentation required (personal income not considered)
  • Cons:
    Only applicable for investment properties, not primary residences

✅ Best for:
Self-employed borrowers purchasing rental or investment real estate

 

5️⃣ FHA Loan – Government-Backed Loan for Lower Credit

  • Required Documents:
    2 years of tax returns, W-2 or Schedule C, credit score 500+
  • Pros:
    Low down payment (3.5% for 580+ credit score; 10% down for 500+ credit), flexible approval criteria
  • Cons:
    Mortgage Insurance Premium (MIP) is required; loan amount limits apply

✅ Best for:
First-time buyers with lower credit and smaller down payments

 

 

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

  • Required Documents: 2–3 years of business financials + SBA-required documents
  • Pros: Long-term financing (up to 25 years) with a low down payment (10%) if the business occupies the space
  • Cons: Lengthy application process; at least 51% of the property must be owner-occupied

✅ Recommended for: Business owners looking to combine workspace and real estate investment

 

 

✨ Final Tip:

The key to getting approved as a self-employed borrower is flexibility in income verification. It’s not just about tax returns—lenders also consider bank statements, CPA-prepared P&Ls, and rental income when evaluating your application.

Written by: Terry Kwon
📞 Phone: (631) 624-4480

Terry Kwon / Licensed Loan Originator / NMLS #2620208
Loan Factory / NMLS #320841