Being your own boss comes with incredible rewards—freedom, flexibility, and the satisfaction of building something of your own. But when it comes to securing a mortgage, self-employed borrowers often face unique challenges that W-2 employees don't encounter.
At CNA Equity Group, we specialize in helping self-employed individuals, freelancers, contractors, and business owners navigate the mortgage process with confidence. Whether you've been in business for decades or just a few years, we have loan programs designed specifically for your situation.
Understanding the Challenges
Self-employed borrowers are no less creditworthy than traditional employees—but the way lenders evaluate income can make the process more complex.
Variable Income Documentation
Unlike W-2 employees with steady paychecks, self-employed income can fluctuate month to month and year to year. Traditional lenders want to see consistency, which can be difficult to demonstrate when your income varies based on seasonal demand, client contracts, or business cycles.
Tax Write-Offs Impact Qualifying Income
One of the biggest ironies for self-employed borrowers: the tax deductions that save you money throughout the year can reduce your qualifying income for a mortgage. When you write off business expenses, mileage, depreciation, and home office costs, your taxable income decreases—and that's the number lenders traditionally use to determine how much you can borrow.
Recent Business Ownership
Many conventional lenders require two full years of self-employment history with tax returns. If you've recently started your business or transitioned from W-2 employment, you may not meet these traditional requirements—even if your business is thriving.
Complex Business Structures
LLCs, S-Corps, partnerships, and sole proprietorships all have different documentation requirements and income calculation methods. Navigating these nuances requires a lender who understands business ownership.
Traditional Documentation Requirements
For self-employed borrowers pursuing conventional financing, lenders typically require:
Personal and Business Tax Returns
Most programs require two years of complete personal tax returns (all pages and schedules). If you own 25% or more of a business, you'll also need business tax returns:
- Sole Proprietors: Schedule C from personal returns
- Partnerships: Form 1065 and K-1s
- S-Corporations: Form 1120-S and K-1s
- C-Corporations: Form 1120
1099 Forms
If you receive income as an independent contractor, lenders will want to see 1099-MISC or 1099-NEC forms from your clients. These help verify the income reported on your tax returns.
Year-to-Date Profit & Loss Statement
A current P&L statement prepared by you or your accountant shows your business performance for the current year. This helps lenders see that your income is stable or increasing.
Business License or Documentation
Proof that your business is legitimate and registered, such as a business license, DBA filing, or articles of incorporation.
Bank Statements
Personal and business bank statements (typically 2 months) help verify cash flow and business activity.
Alternative Documentation Options
The good news? Traditional tax-return-based programs aren't your only option. We offer several alternative documentation programs specifically designed for self-employed borrowers.
Bank Statement Loan Programs
Bank statement loans allow you to qualify based on deposits into your business or personal bank accounts, rather than tax returns. This is ideal if you take significant write-offs that reduce your taxable income.
How They Work
Instead of analyzing tax returns, the lender reviews 12 to 24 months of bank statements and calculates your income based on deposits. Typical expense factors of 25% to 50% are applied depending on your industry and business type.
Who Benefits Most
- Business owners with substantial tax deductions
- Self-employed borrowers with strong cash flow but lower taxable income
- Real estate investors with significant depreciation
- Commission-based professionals with variable income
Requirements at a Glance
| Requirement | Typical Guidelines |
|---|---|
| Credit Score | 660-680 minimum (varies by program) |
| Down Payment | 10-20% minimum |
| Bank Statements | 12-24 months (business or personal) |
| Time in Business | 2 years preferred (some 1-year options available) |
| Documentation | CPA letter may be required |
Profit & Loss Statement Programs
P&L programs use a year-to-date profit and loss statement prepared by a CPA or licensed tax professional to document your income. This allows you to qualify without waiting for the current year's tax returns to be filed.
When This Makes Sense
- Your income has increased significantly in the current year
- You need to close quickly and haven't filed recent tax returns
- You're in a seasonal business with strong current-year performance
- You want to use the most recent income figures
Documentation Required
- CPA-prepared P&L statement for year-to-date
- Previous year's tax returns (typically 1-2 years)
- CPA license verification
- Business bank statements
1099 Income Programs
Specialized programs for independent contractors and gig workers who receive most or all of their income via 1099 forms. These programs may have more flexible documentation requirements than traditional self-employed loans.
Ideal Candidates
- Consultants and freelancers
- Real estate agents
- Rideshare and delivery drivers
- Contract professionals with multiple clients
- Healthcare professionals (travel nurses, locum tenens physicians)
What Lenders Look For
- Consistent 1099 income from established clients
- Proof of ongoing contracts or relationships
- Bank statements showing regular deposits
- Two-year history in the same field
Business Ownership Structure Considerations
Your business entity type affects both how lenders calculate income and what documentation they'll require.
Sole Proprietorships
The simplest structure. Income is reported on Schedule C of your personal tax return. Lenders will add back certain expenses like depreciation and depletion when calculating qualifying income.
Partnerships
If you own 25% or more of a partnership, lenders will need Form 1065 and your K-1. Your percentage of the business income and distributions will be analyzed for qualifying purposes.
S-Corporations
S-Corp owners receive W-2 wages plus K-1 distributions. Lenders will use both when qualifying you, and may add back depreciation and other non-cash expenses. Form 1120-S is required.
C-Corporations
C-Corps are separate tax entities. If you own 25% or more, you'll need Form 1120. Lenders will use your W-2 wages and may consider dividends, depending on consistency.
Limited Liability Companies (LLCs)
LLCs can be taxed as sole proprietorships, partnerships, or corporations. Documentation requirements depend on your LLC's tax election.
The CNA Equity Group Difference
With over 24 years of experience working with self-employed borrowers, we understand that traditional lending guidelines don't always reflect the reality of running a successful business.
Specialized Self-Employed Expertise
We've helped thousands of business owners, freelancers, and independent contractors secure financing. We know how to position your application to highlight your strengths and navigate the unique aspects of self-employed income.
Multiple Loan Program Access
Because we work with numerous lenders and investors, we can offer:
- Traditional conventional and government loans
- Bank statement programs (12 and 24-month options)
- P&L statement loans
- 1099 contractor programs
- Stated income options for qualified borrowers
- Jumbo loans for high-balance properties
Strategic Income Positioning
We'll help you understand how different documentation methods impact your qualifying income and which program gives you the strongest purchasing power.
Preparation and Guidance
Before you even apply, we'll review your situation and help you gather the right documentation. We can also advise on timing—such as whether to wait until after tax filing season or proceed with alternative documentation.
Dedicated Communication
Self-employed loans can involve more documentation and underwriting questions than traditional loans. We stay in close contact throughout the process to address issues quickly and keep your loan moving forward.
Getting Started
The key to a smooth mortgage process as a self-employed borrower is working with a lender who understands your unique situation and has access to the right programs.
Whether you've been self-employed for decades or recently launched your business, whether your income is documented traditionally or requires creative solutions, we're here to help.
What to Prepare
Before reaching out, it's helpful to have:
- A general idea of your income and business structure
- Access to recent tax returns or bank statements
- Information about your credit and down payment
- Your business timeline and ownership percentage
Don't worry if you don't have everything perfect—we'll guide you through exactly what's needed.
Ready to Explore Your Options?
You've built your own business and created your own success. Now let us help you achieve your homeownership goals.
Contact CNA Equity Group today to discuss which self-employed loan program is right for your situation. We'll provide a clear path forward and position you for success.
Call us at (925) 244-1505 to speak with a self-employed lending specialist.