The Self-Employed Borrower's Mortgage Guide

If you're self-employed, getting a mortgage can feel like an uphill battle. Lenders view self-employment income as less stable than traditional W-2 wages, which means you'll face extra scrutiny during the underwriting process.

The good news is that millions of self-employed borrowers get mortgages every year. The key is understanding what lenders need and preparing your documentation accordingly.

Most lenders require two years of tax returns for self-employed borrowers. They'll calculate your income by averaging your net self-employment income (after business deductions) over those two years. This is where many self-employed borrowers run into trouble.

Business owners often minimize taxable income through legitimate deductions. While this saves money at tax time, it can hurt your mortgage application. Lenders can only count the income you report to the IRS.

In addition to tax returns, you'll typically need profit and loss statements, business bank statements, and sometimes a CPA letter verifying your business is active and in good standing.