How to Qualify for a Mortgage When You’re Self-Employed

Getting a mortgage as a self-employed borrower can feel more complicated than for traditional W-2 employees. But the good news? It’s absolutely possible—you just need to be prepared.

Lenders want to see stable income, strong financial records, and proof that you can afford the loan. This guide will walk you through how to qualify for a mortgage when self-employed, covering what lenders look for and how to improve your chances of approval.

1. Understand What Lenders Look For

Lenders assess self-employed borrowers based on:

Consistent Income: Typically a two-year history of self-employment.
Debt-to-Income Ratio (DTI): A lower DTI makes approval easier.
Credit Score: Higher scores can improve loan terms.
Cash Reserves: Savings help demonstrate financial stability.

Pro Tip: The more organized your financial documents, the smoother the process will be.

2. Gather the Right Documentation

Unlike traditional employees who provide W-2s, self-employed borrowers must submit:

Tax returns (typically two years’ worth)
Profit & Loss (P&L) statements
Bank statements (business & personal)
Business license or proof of self-employment
1099 forms (if applicable)

Pro Tip: Work with an accountant to ensure your tax returns show sufficient income.

3. Maximize Your Income on Tax Returns

Many self-employed individuals deduct expenses to lower taxable income.
While great for tax savings, this reduces the income lenders see for mortgage qualification.
If planning to buy a home, consider limiting deductions for two years before applying to show a higher qualifying income.

Pro Tip: Lenders typically look at net income after deductions—not gross revenue.

4. Keep Your Debt-to-Income Ratio (DTI) Low

DTI measures monthly debt payments vs. income—lenders prefer it to be 43% or lower.
To improve DTI:
- Pay down credit card balances.
- Avoid taking on new debt (like car loans) before applying.
- Increase income (if possible) before applying.

Pro Tip: A lower DTI can help you qualify for better loan terms and higher loan amounts.

5. Strengthen Your Credit Score

A higher credit score makes it easier to qualify for a mortgage and get lower interest rates.
Steps to boost your score:
- Pay bills on time.
- Keep credit utilization low (below 30%).
- Avoid opening new credit accounts before applying.

Pro Tip: A score of 700+ can help secure better loan options, but some programs accept lower scores.

6. Consider a Bank Statement Loan

If your tax returns don’t reflect enough income, alternative loan options exist:

Bank statement loans use 12-24 months of bank statements instead of tax returns to verify income.
May require a larger down payment and slightly higher interest rates.
Ideal for business owners who reinvest heavily and show lower net income on taxes.

7. Save for a Larger Down Payment

A higher down payment (20% or more) can:
- Reduce lender risk, making approval easier.
- Eliminate the need for private mortgage insurance (PMI).
- Lower your monthly payment.

Pro Tip: Even if 20% isn’t required, having a strong down payment improves your mortgage options.

8. Work with a Mortgage Broker Who Understands Self-Employed Borrowers

Not all lenders specialize in self-employed mortgages.
A mortgage broker can help:
- Find lenders that work with self-employed buyers.
- Recommend the best loan program for your income situation.
- Guide you through documentation requirements.

Pro Tip: At Weber Mortgage, we work with self-employed homebuyers to navigate the mortgage process smoothly!

Final Thoughts: You CAN Qualify as a Self-Employed Borrower!

Getting a mortgage while self-employed takes extra preparation, but with strong documentation, a solid financial profile, and the right lender, you can absolutely qualify.

Steps to Get Started:

Get your financial documents in order.
Optimize income, credit, and debt-to-income ratio.
Work with an experienced mortgage broker to find the right loan.

Thinking about buying a home? Let’s make a plan to get you pre-approved! Reach out today.