Last updated October 28, 2026
You can get a regular mortgage when you work for yourself. The catch is that the lender doesn’t see what your business brings in; it sees what your tax returns show after write-offs. Enter your last two years below and see the income a lender will count, the house it supports and what your deductions are costing you at the closing table.
Yes, the same conventional, FHA and VA loans everyone else gets. The difference is proof: lenders generally want two years of self-employment and two years of tax returns. With less than two years, you can still qualify if your latest return shows a full 12 months from the business and you earned similar income in the same line of work before. Less than two years on your own ↓
From your tax returns, not your deposits. They start with net profit, add back paper expenses like depreciation, and average the last two years. A business netting $115,000 and then $130,000, with $8,000 and $10,000 added back, counts as $131,500 a year, or $10,958 a month. The worked example ↓
Yes. Every dollar you deduct is a dollar of income the lender can’t count, unless it’s an add-back like depreciation. In the example on this page, $10,000 more in deductions last year cuts about $25,400 from the house price that fits. What a write-off costs you ↓
The lender uses the lower year, not the average. If that example business came in at $105,000 last year instead of $140,000, counting add-backs, the price that fits drops from about $587,000 to about $452,000. A big drop also needs a written explanation, and some lenders wait for another year of returns. When income drops ↓
Only when your write-offs hide most of your income. A bank statement loan counts 12 to 24 months of deposits, usually less a 50% expense factor, but lenders’ published terms call for at least 10% down and a rate typically 0.5 to 1.5 points higher. If your returns already show your income, a regular loan wins. Tax returns vs. bank statements ↓
Sources: Fannie Mae Selling Guide, self-employment income sections B3-3.2 through B3-3.6; HUD Handbook 4000.1; lenders’ published bank statement loan terms. Examples use this page’s calculator defaults.
Enter what your returns show. Net profit is line 31 of Schedule C, or the ordinary business income on your K-1. Add-backs are expenses that didn’t cost you cash: depreciation, depletion, amortization, business use of your home and one-time casualty losses. Your CPA can pull these in five minutes.
Estimates only. Insurance is figured at 0.4% of the price a year and mortgage insurance at 0.5% of the loan under 20% down. St. Louis County tax bills on 2026 sales mostly ran 0.8% to 1.1% of the price; check the area you’re buying in. Your lender’s written analysis is the real number.
They run a cash flow analysis. Fannie Mae requires lenders to put it in writing, on its Form 1084 or a worksheet that follows the same rules. It works in three steps.
Here’s the example the calculator opens with. A business nets $115,000 two years ago and $130,000 last year, with $8,000 and $10,000 in depreciation and home-office deductions. The lender counts $123,000 and $140,000, averages them to $131,500, and qualifies you on $10,958 a month. With a $600 car payment, 10% down at 6.75% and a 45% debt-to-income limit, that supports about a $587,000 house: $3,426 a month in principal and interest and $4,331 with taxes, insurance and mortgage insurance.
About $2.54 of house price for every dollar of deduction, in the example above. Deduct $10,000 more last year and the two-year average drops $5,000; at a 45% debt limit that’s about $25,400 less house. If your income is falling, the lender uses only the latest year, and the same $10,000 costs about twice as much.
That’s the trade every self-employed buyer makes: lower taxes now, or more income on paper for the lender. Don’t make it in April by yourself. If you plan to buy in the next year or two, sit down with your CPA and a lender before you file, so you know what the return needs to show.
My take: talk to a lender a year before you think you’re ready, not a month. I send every buyer to a lender before they go under contract, and for business owners that conversation has to come before the tax return, because once it’s filed, that’s the number.
The lender qualifies you on the lower year. Using the same business, if last year’s profit plus add-backs came in at $105,000 instead of $140,000, the lender uses $105,000, not the $114,000 average, and the price that fits drops to about $452,000.
A drop also changes how the file is reviewed. Expect a letter explaining why: a lost client, a slow season, a year you reinvested. When the drop is large, about 20% or more, some lenders won’t approve it until another year of returns shows the income stabilized. If you know last year was down, find that out before you start looking at houses.
On the K-1, plus proof the money actually reaches you. Fannie Mae treats anyone who owns 25% or more of a business as self-employed. Partners and S-corporation owners get a K-1 instead of a Schedule C, and the lender counts that income only if your distributions match it, or if the business’s own balance sheet shows it can afford to pay it out.
Partners in firms where income swings from year to year, or arrives as distributions after the year closes, should bring both years of business returns to the first lender meeting, not just the K-1.
Doctors buying into a practice have one more option: some physician loan programs accept practice owners, but whether they qualify you on a contract or on your returns varies by lender. What physician loans offer →
Yes, if you did the same work before. Fannie Mae allows it when your most recent tax return shows a full 12 months of income from the business, and you earned similar or more income in the same field or a similar one before going out on your own. A nurse who opens a practice qualifies sooner than a nurse who opens a restaurant.
FHA works much the same way: two years is the standard, and one to two years can work with prior experience in the same line of work. With less than a year on your own return, most buyers wait.
Only when your write-offs hide your real income. A bank statement loan is a non-qualified mortgage: the lender reads 12 or 24 months of deposits, usually subtracts a 50% expense factor for a business account, and qualifies you on the rest. Lenders’ published terms call for at least 10% down, often 15% to 20%, and a rate typically 0.5 to 1.5 points above a conventional loan.
In the calculator’s example, $22,000 a month in deposits less 50% counts as $11,000, almost exactly what the tax returns show. With the higher rate, the bank statement loan supports about $544,000, less than the $587,000 the regular loan does. It only pulls ahead when your deductions are large compared with your deposits. Run both before you pick.
The down payment, about 2.5% for closing costs, and six months of house payments left over. In the example, that’s about $73,400 to close and $26,000 in reserve, roughly $99,400 in all.
My take: keep six months of house payments after closing, regardless of what the loan program requires. When your income comes from clients instead of a paycheck, that reserve is what carries you through a slow quarter without touching the mortgage.
Documents and money
Two years of signed personal tax returns with every schedule, and two years of business returns if you own 25% or more of a partnership or corporation. Many lenders also ask for a year-to-date profit and loss statement and recent business bank statements. When the business has been open at least five years, some files need only one year of returns. The full pre-approval checklist →
Yes. 1099 pay is reported on Schedule C, so lenders treat it like a business: net profit after expenses, averaged over two years. A contractor whose 1099s add up to $150,000 but who deducts $40,000 in expenses qualifies on about $110,000, plus any add-backs. How the math works ↑
Usually, yes, if you own the business and the lender confirms that taking the cash out won’t hurt it. Expect the lender to review the business’s cash flow before it counts those funds. Moving the money to your personal account early, with a clear paper trail, makes it simpler. How much cash you need ↑
This is one piece of the St. Louis home buying process. See how it all fits together:
📚 Complete St. Louis Buyer Guide →
Grew up in South St. Louis, lived in Dogtown for 6 years, now in South County. You'll find us at Wellspring on Lindbergh on Sundays. I'm not selling you a house — I'm showing you how to think about buying or selling a house.
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