How to Get a Mortgage with Self Employment Income 2026: Freelancers, 1099, & Business Owners Guide
16 million Americans are self-employed (freelancers, 1099 contractors, business owners). Getting a mortgage is harder but NOT impossible! This complete 2026 guide reveals 3 proven strategies: traditional loans with 2-year tax returns, bank statement loans (12-24 months of deposits), and profit & loss statements. Real examples show how self-employed borrowers with $100K+ income got approved.
🎯 Quick Answer: 3 Ways to Qualify
💰 Real Example: Freelancer with $120K Income
Borrower Profile:
✅ Approved for $400K Home!
3 Ways to Qualify with Self Employment Income
Traditional Loan (2-Year Tax Returns) - Best Rates
Most common method. Show 2 years of tax returns (1040 + Schedule C/K-1) with consistent or increasing income. Lenders average your net income after deductions.
✅ Requirements:
- • 2 years of tax returns (1040 + Schedule C for sole proprietors, or K-1 for partnerships/S-corps)
- • Consistent income: 2024 income ≥ 2023 income (or declining <20%)
- • Same line of work: 2+ years in same industry
- • Credit score: 620+ (conventional), 580+ (FHA)
- • DTI: 43-50%
📊 Income Calculation Example:
💡 Pro Tips:
- • Add-backs: Lenders add back depreciation, one-time expenses, and meals/entertainment to your income
- • Declining income: If 2024 income is lower, write a letter explaining why (e.g., took time off, one-time expense)
- • Multiple income sources: Combine W-2 + 1099 income if you have both
Bank Statement Loan (12-24 Months) - No Tax Returns
Best for high earners with lots of deductions. Show 12-24 months of bank statements instead of tax returns. Lenders use 50-75% of deposits as income.
✅ Requirements:
- • 12-24 months of business bank statements
- • Credit score: 680+ (some lenders accept 660+)
- • Down payment: 10-20% (higher than traditional)
- • DTI: 43-50%
- • Rates: 0.5-1% higher than traditional loans
📊 Income Calculation Example:
*50% for personal accounts, 75% for business accounts
⚠️ When to Use Bank Statement Loans:
- • Your tax returns show low income due to heavy deductions
- • You're a new business owner (<2 years)
- • You have inconsistent income year-to-year
- • You can afford 10-20% down and higher rates
P&L Statement (1 Year) - Fastest Approval
For established businesses. CPA-prepared profit & loss statement showing 1 year of income. Faster than tax returns but higher rates.
✅ Requirements:
- • CPA-prepared P&L for current year (YTD)
- • Business license or proof of business existence
- • Credit score: 700+
- • Down payment: 15-25%
- • Rates: 0.75-1.5% higher than traditional
💡 Best For:
- • New business owners (1-2 years in business)
- • High earners who need fast approval
- • Borrowers who haven't filed taxes yet for current year
🏠 Get Pre-Approved as Self-Employed Today!
Compare lenders who specialize in self-employed borrowers. Get approved in 14-21 days!
Compare Lenders Now →No credit impact • Free comparison • Self-employed friendly
Documents You'll Need
📄 Traditional Loan Documents:
- • 2 years of personal tax returns (1040 with all schedules)
- • 2 years of business tax returns (Schedule C, 1120, 1120S, or 1065)
- • Year-to-date P&L statement (if applying mid-year)
- • Business license or articles of incorporation
- • 2 months of bank statements (personal + business)
- • CPA letter (optional but helpful)
📄 Bank Statement Loan Documents:
- • 12-24 months of bank statements (business account preferred)
- • Business license or proof of self-employment
- • CPA letter confirming self-employment status
- • Credit report (lender pulls)
📄 P&L Statement Loan Documents:
- • CPA-prepared P&L statement (current year YTD)
- • Business license or articles of incorporation
- • 3-6 months of bank statements
- • CPA contact information (for verification)
Frequently Asked Questions (FAQs)
How long do I need to be self-employed to get a mortgage?
2 years minimum for traditional loans. However, bank statement loans accept 12-24 months of deposits, and P&L loans accept 1 year if you have strong income and credit.
Can I get a mortgage if my income varies month to month?
Yes! Lenders average your income over 2 years (traditional) or 12-24 months (bank statement). Variable income is normal for self-employed borrowers. Just show consistent annual totals.
Do I have to show 2 years of tax returns?
Not always! Bank statement loans (12-24 months of deposits) and P&L loans (1 year CPA statement) don't require tax returns. These are great if your tax returns show low income due to deductions.
What if my 2024 income is lower than 2023?
Write a letter of explanation describing why (e.g., took time off, one-time expense, industry slowdown). If decline is <20%, most lenders will still approve. If >20%, consider a bank statement loan instead.
Can I use my gross income or just net income?
Net income only for traditional loans (after business expenses). However, lenders add back depreciation, one-time expenses, and meals/entertainment. Bank statement loans use 50-75% of gross deposits.
Do I need a business bank account?
Not required but highly recommended. Business accounts get 75% income calculation vs 50% for personal accounts on bank statement loans. Plus, it's easier to track business income/expenses.
Can I combine W-2 income with self-employment income?
Yes! If you have both W-2 and 1099 income, lenders will combine them. W-2 income is easier to verify (just paystubs), while 1099 income requires 2-year tax returns.
Which lenders are best for self-employed borrowers?
Best lenders: Quicken Loans (flexible DTI), Better.com (bank statement loans), SoFi (1099 specialists), Navy Federal (members only), and local credit unions. Compare 3-5 lenders to find the best fit.