If you’re self-employed, getting a mortgage can be challenging. Traditional lenders require 2 years of tax returns, paychecks, and other proof of reliable income that you may lack.
Fortunately, alternative non-qualified mortgage lenders offer creative solutions with more relaxed guidelines that are tailored to the income patterns of entrepreneurs, freelancers, contractors, and business owners.
Below, we explore the top 8 creative mortgage loans for self-employed individuals and tips for getting approved. Whether you’re looking to refinance or buy a home, there’s a program designed to fit your income documentation and credit profile.
Getting a mortgage when self-employed can be difficult—but not impossible. The key is understanding the difference between QM loans and non-QM loans. The non-QM route is often the better way to get approved for a mortgage when you’re self-employed.
QM stands for “qualified mortgage.” In the aftermath of the 2008 U.S. housing market crash, new federal legislation was enacted to require mortgage lenders to scrutinize a borrower’s “ability to repay” the loan based on eight underwriting guidelines:
Lenders who strictly follow those guidelines are presumed to have complied with the ability-to-repay requirement and their mortgages are given safe harbor as “qualified mortgages” (QM).
Non-QM means “non-qualified mortgage.” The guidelines for QM loans can be quite strict, especially for self-employed borrowers. For example, under guideline #7 for debt-to-income ratio (DTI), you must prove your DTI is less than 43%.
These limitations led to the creation of “non-qualified mortgages” (non-QM). Non-QM lenders are also required to assess your ability to repay, but they do so in a more relaxed way. For example, some non-QM lenders accept a DTI as high as 50% or even 55%.
Because non-QM lenders do not strictly adhere to the 8 ability-to-repay guidelines, their loans do not receive the presumption of safe harbor compliance. Therefore, traditional lenders and banks refrain from offering these products.
When it comes to getting approved for a home mortgage for self-employed borrowers, focus on lenders that offer non-QM products and understand your unique circumstances. Learn more about the niche area of alternative mortgages.
The chart below compares the top 8 non-QM options available for self-employed borrowers. The programs differ based on the level of documentation to verify your income.
| Loan Program | Best for | Income Verification | Min Down Payment | Min Credit Score | Max Loan Amount |
|---|---|---|---|---|---|
| Bank Statement Loan | Self-employed borrowers with strong deposits | 12-24 months bank statements + CPA letter | 10-15% | 620-660+ | $6M+ |
| 1099 Mortgage Loan | Freelancers, gig workers, seasonally employed | 12–24 months of 1099s or bank statements | 10-15% | 640+ | $6M+ |
| No-Ratio Loan | High-net-worth borrowers with high DTI or complex income | No income or employment verification | 20% | 660+ | $2M+ |
| P&L Statement Loan | Business owners with CPA-prepared financials | 12–24 month CPA-prepared P&L + CPA letter | 20-25% | 620–660+ | $6M+ |
| One-Year Tax Return | Newly self-employed with strong recent income | Most recent personal & business tax returns + YTD P&L | 10-15% | 620-660+ | $6M+ |
| DSCR Loan | Real estate investors | Rental income only; no personal income or employment docs | 15-25% | 620-660+ | $6M+ |
| Foreign National Loan | Non-U.S. citizens buying investment properties | CPA letter or DSCR qualification | 25–35% | N/A | $6M+ |
| Asset Utilization Loan | Borrowers with significant liquid or retirement assets | Asset-based income calculation (liquid, retirement, crypto) | 20% | 620–640+ | $6M+ |
Next, we explore each of these 8 programs that a self-employed borrower may apply for in more detail. Let’s learn more about the different options you have to get a mortgage when you’re self-employed.
We have the creativity and expertise to help.
The bank statement program is the most common self-employed program that nearly all non-QM lenders offer. As a result, this loan comes with a wider range of terms to suit the varying circumstances that self-employed borrowers face.
A bank statement mortgage is suited for self-employed borrowers who have sufficient income to meet their monthly mortgage payments but unfortunately do not have tax returns reflecting this income. So, lenders allow borrowers to demonstrate their income through their bank statements instead of personal tax returns.
Non-QM lenders verify your income through:
Demonstrating the flexibility of this program, non-QM lenders use multiple ways to calculate your bank statement income.
Generally speaking, the lender will determine your net business income by taking your gross income minus expenses. Specifically, the underwriter will take the average of your gross deposits, as reflected on your bank statements, and multiply that average by an expense ratio. The expense ratio is typically 50% but may go as high as 55% depending on whether your business offers services or goods.
Some lenders only require the first page of each statement. Oftentimes, the later pages of bank statements contain line items for large deposits or withdrawals. With only the first page being required, you can avoid having to source and explain such large deposits and withdrawals. Nor do you have to worry about keeping business and personal expenses separate.
The maximum DTI allowed under the bank statement program is typically 50% or even 55%, more lenient than the 43% maximum imposed by traditional QM lenders.
Under the bank statement program, you can expect the following LTVs:
For a purchase loan, the LTV is computed by dividing the loan amount by the property’s appraised value or contract price, whichever is lower. For refinances, the LTV is the ratio of the loan amount and the property’s appraised value.
By submitting your bank statements, your loan amount can be as high as $6M or even higher.
This loan program can be used to purchase or refinance several types of properties, including:
The bank statement program is available for all occupancy types (primary, second, and investment).
Some bank statement lenders allow credit scores as low as 620. Of course, the higher your credit score, the better your terms will be (higher maximum LTV, lower interest rate). Learn more about mortgages without tax returns.
The 1099 mortgage loan program is designed for self-employed borrowers and independent contractors who receive IRS Form 1099 income instead of salaried or hourly W-2 wages. This program allows borrowers to qualify using gross 1099 earnings rather than tax returns, making it an ideal solution for those with significant deductions that reduce reported income.
A 1099 mortgage loan is ideal for freelancers, independent contractors, and gig workers who do not receive a W-2 but have a steady income stream from contract work. Borrowers must demonstrate at least one year of 1099 earnings in the same industry, though some lenders may require two years.
Non-QM lenders verify income by reviewing 1099 forms from the past one to two years and year-to-date (YTD) income using recent bank statements covering at least four to twelve months. Some lenders may also require a verification of employment (VOE) from the contract employer to confirm ongoing work.
Lenders typically calculate qualifying income using 90% of gross 1099 income or the YTD income average, depending on which method produces the most favorable result.
Borrowers using a 1099 mortgage loan program can expect the following LTV limits:
1099 mortgage loans allow financing up to $6 million or more, making them ideal for high-income self-employed borrowers.
The 1099 mortgage loan is available for primary residences, second homes, and investment properties. Eligible property types include:
Many lenders accept credit scores as low as 640 for 1099 mortgage loans. However, borrowers with higher credit scores may qualify for better loan terms, including higher LTV limits and lower interest rates.
This program is called “no ratio” for one simple reason: your debt-to-income ratio is not a factor.
This niche loan stands out from all other loan types. It is a game-changer, a one-of-a-kind program that is only offered by a few non-QM lenders in the U.S.
Its most important feature is its lack of income and employment requirements. This program is available for both purchase and refinance.
The no-ratio program is best suited for self-employed borrowers who:
To make up for the high DTI, which is common among self-employed, lenders rely on the borrower’s credit score to demonstrate their ability to repay and lower LTV to minimize their risks.
You can compute your DTI by dividing your total monthly debt (which includes the proposed carrying costs of the subject property and the liabilities reflected in your credit report) by your gross monthly income.
Under the no-ratio program, you do not have to submit any proof of income or employment at all. It’s simple:
The lender will not require your tax returns, tax transcripts (4506-Ts), or employment verification.
You simply leave the income and employment sections blank in your loan application. Your DTI will not be calculated either; hence, the name “no ratio.”
The no-ratio program typically offers the following LTVs:
If you need a super jumbo loan, the no-ratio program offers up to $6M or more, allowing you to purchase or refinance luxury properties in the hottest markets.
The property must be owner-occupied (primary residence and second/vacation home) to be eligible for the no-ratio program. If you would like to purchase or refinance an investment property and enjoy the same benefits as the no-ratio program, you may consider applying under the DSCR program instead.
This loan program can be used to purchase or refinance several types of properties, including:
Your credit score plays a key role—most lenders require a score of 660 or above, though better scores offer better terms. Of course, the higher your credit score is, the better the terms and offers you will receive.
The P&L program allows self-employed borrowers to submit a profit and loss statement as proof of income.
This program is best suited for the self-employed borrower who may not have traditional income documentation but still has strong financials. Understanding this tricky situation, lenders accept alternative documentation in the form of a P&L statement.
Under the P&L program, borrowers do not need to submit tax returns, tax transcripts, W2s, 1099s, or any other typical income verification documents. Instead, you’ll need to provide a copy of the following:
To qualify for this program, your DTI should be at most 50% or 55%.
Under the P&L program, you can expect the following LTVs:
Under the P&L program, your loan amount can be as high as $6M or even higher.
This loan program can be used to purchase or refinance several types of properties, including:
The P&L statement program is available for all occupancy types (primary, second, and investment).
Some P&L statement lenders allow credit scores as low as 620. Of course, the higher your credit score, the better your terms will be (higher maximum LTV, lower interest rate).
Our programs understand the unique financial circumstances of self-employed individuals.
If you’ve been self-employed for at least one full year and you want to provide only one year of tax returns, instead of the traditionally required two years of tax returns, the one-year tax return program may be for you.
This program is ideal for borrowers who:
Perhaps you’ve become self-employed just recently, and you only filed tax returns for one year so far, so you simply don’t have 2 years worth of tax returns.
Or, you do have at least 2 years of tax returns filed, but the old tax returns show relatively low income, while your most recent year shows strong income.
Your income must be stable, with no significant recent decline, and must reasonably continue for the next 3 years.
Under this program, you’ll be providing the lender with:
Loan-to-value ratios of up to 80% are available for both purchase and refinance transactions. Higher LTVs may require additional reserves or documentation depending on the borrower profile.
Loan amounts of up to $6 million are available under this program. Higher amounts may be possible with compensating factors or exceptions.
The program is available for both purchase and rate-and-term refinance structures, and for all occupancy types (primary and investment).
Some lenders offering the 1-year tax return program allow credit scores as low as 620. Of course, the higher your credit score, the better your terms will be (higher maximum LTV, lower interest rate).
In sum, the one-year tax return program gives self-employed borrowers a faster route to homeownership or refinancing—without waiting to file two full years of returns. With strong credit, stable income, and solid cash flow, you may still get approved using just your most recent tax return.
The DSCR program is the no-ratio program’s counterpart, in that it is designed for investment properties instead of owner-occupied properties. In essence, the lender assesses your ability to repay by looking at the property’s income potential (cash flow) instead of your personal income.
This loan program is ideal if you want to qualify based on rental income rather than personal income, especially as a self-employed investor.
Same as the no-ratio program, your income will not be checked, and your employment will not be verified.
Instead, lenders pay attention to the cash flow of the property as measured by its “debt service coverage ratio” (DSCR).
To roughly calculate the DSCR of the property, take your gross rental income, and divide that by the total PITIA expenses (principal + interest + taxes + insurance + association fees). The exact gross income or net income calculation can slightly vary from lender to lender. Simply put, your income from the property should be at least equal to the property’s expenses to be eligible.
In other words, a DSCR of at least 1.00x is deemed creditworthy by lenders.
However, some non-QM lenders accept DSCRs less than 1.00x (as low as .75x or even lower). This can be particularly helpful for high-end luxury properties, where the carrying costs are relatively high.
Under the DSCR program, here are the maximum LTVs that you can typically expect:
If you qualify for a DSCR loan, you can purchase or refinance a wide range of residential investment properties, including high-end ones with a $6M maximum loan amount or more.
Note that the DSCR program is only for non-owner-occupied investment properties, not primary residences or second/vacation homes.
The eligible properties under the DSCR program are:
A minimum credit score in the 620s is required by most lenders offering the DSCR program. You just have to search for a non-QM lender who can meet your personal credit situation.
Next on our list is the loan program designed for self-employed foreign nationals looking to get a loan to invest in U.S. real estate.
This loan is for self-employed foreign nationals who opt not to go through the stringent credit and documentary requirements practiced by most banks and other traditional lenders.
As a foreign national, you have 2 options to qualify. First, you may take the DSCR path and use the property’s cash flow rather than your personal income. See the DSCR guidelines mentioned above.
The second option is to qualify using your own personal income. The lender will ask for an accountant letter stating your self-employment income for the past two years and year-to-date (YTD). Note that letters written in a foreign language must be translated into English by a certified translator.
Understandably, being self-employed and a foreign national at the same time comes with higher risks and requires lenders to be more conservative. As a result, their maximum LTVs are relatively lower than the other programs on our list. Specifically, the maximum LTVs are:
The maximum loan amount is at par with other mortgage loans, set at a maximum of $6M or more.
Note that the foreign national program is only for investment properties and second/vacation homes, not primary residences.
The eligible properties under the foreign national program are:
Typically, foreign nationals do not have a U.S. credit score, a huge roadblock in them getting a traditional mortgage loan. Considering this issue, non-QM lenders designed this niche loan without any credit score requirements at all for foreign nationals.
The asset utilization loan program is unique because instead of income per se, your creditworthiness is evaluated based on your assets. This is a creative outside-the-box mortgage loan designed for self-employed borrowers who do not otherwise qualify for other self-employed loan programs.
The asset utilization program serves self-employed borrowers and anyone with ample cash reserves and considerable assets like retirees, day traders, serial entrepreneurs, and other borrowers with trust funds. It does not assess your cash flow and liquidity as long as you have significant assets to declare.
This program does not require any form of employment verification. Instead, the lender will go based on your assets. These assets may include:
Using the declared assets, non-QM lenders estimate the borrower’s monthly income by dividing the value of the post-closing assets by a certain number of months, typically 60 to 84 months. Some lenders only require one month’s statement from each asset to qualify for this program.
Borrowers are also required to have a maximum DTI of 50% or 55% depending on the lender.
Under the asset utilization program, you can expect the following LTVs:
Under the asset utilization program, your loan amount can be as high as $6M or even higher.
The asset utilization program is available for all occupancy types (primary, second, and investment).
This loan program can be used to purchase or refinance several types of properties, including:
Some asset utilization lenders allow credit scores as low as 620. Of course, the higher your credit score, the better your terms will be (higher maximum LTV, lower interest rate).
Book a free consultation with us to discuss your self-employed scenario.
Now that you know more about 8 of the most popular loan options for self-employed borrowers, the next step is to apply under the program that fits your scenario the best. Regardless of the program, here are 5 general tips to boost your odds of approval.
For all programs, the lender will require you to have enough post-closing reserves, i.e., sufficient funds to cover the mortgage payments. Having sufficient reserves will help convince lenders you’re able to repay the loan.
Depending on the loan amount, the reserves requirement may range from 2 to 12 months’ worth of mortgage payments.
For example, if your total monthly payment of principal, interest, taxes, insurance, and association fees (PITIA) will be $5,000, and the lender requires that you have 6 months worth of reserves, you’ll need to submit an asset statement showing an available balance of at least $30,000. You may use a checking, savings, stock, or retirement account to satisfy this requirement.
Please note that for cash-out refinances, most lenders allow the cash-out amount to count towards the reserves requirement. So, in the above example, if your cash-out amount is at least $30,000, you wouldn’t need to provide an asset statement to prove reserves.
Make sure to discuss this with potential lenders, as just like QM loans, non-QM lenders also have reserve requirements.
For all programs mentioned above except the No-Ratio and DSCR programs, the lender will require your DTI to be under a certain threshold, usually 50% or less.
To improve your chances of loan approval, work on reducing your DTI by paying down outstanding debts and avoiding new debt obligations in the months leading up to your mortgage application.
Besides assets and income, your credit score is another important factor. Even if your current credit score meets the lender’s minimum requirement, a higher credit score plays a significant role in securing favorable mortgage terms, such as a higher LTV and a lower interest rate.
Take steps to improve your credit score by paying bills on time, reducing outstanding debts to lower your credit utilization, and disputing any inaccuracies on your credit report.
Having a high credit score also helps in terms of getting exceptions. Sometimes, challenges can crop up during the underwriting process, and you may need to request the lender to make an exception to one of their guidelines. For example, if your DTI is 52% (higher than the lender’s 50% maximum requirement), the higher your credit score, the higher your chance of getting an exception granted for your high DTI.
For a purchase transaction, what is the highest down payment you can make? For a refinance transaction, what is the lowest loan amount you are able to accept to pay off the current mortgage on the property?
The lower your loan-to-value (LTV), this will indicate to lenders you have more “skin in the game” reducing its risk and increasing your odds of getting approved for a home loan and better terms. For example, a larger down payment on a purchase usually translates to a lower interest rate.
Finding the right mortgage lenders that specialize in self-employed borrowers can significantly improve your approval odds. Working with a mortgage broker offers several benefits.
First, the vast majority of non-QM lenders only work through a wholesale channel (as opposed to a direct retail channel), meaning you can only access their programs via a mortgage broker.
Second, mortgage brokers have an extensive network of lenders at their disposal. By working with a mortgage broker, you gain access to a broader range of lending options than you might find on your own.
Third, mortgage brokers streamline the application process. They can assess your unique financial situation, help you gather the necessary documentation, and present your application in the best possible light to potential lenders. For example, they can offer guidance on whether it might strengthen your application to apply with a co-borrower.
Fourth, mortgage brokers act as intermediaries, negotiating on your behalf with lenders to secure competitive rates and terms. They can help you compare offers from multiple lenders, ensuring that you make an informed decision.
Discover how real self-employed professionals secured their dream homes with flexible non-QM mortgage solutions. These success stories showcase how different mortgage programs helped borrowers overcome common self-employment challenges.
A self-employed business owner had strong cash flow but maximized tax deductions, which made reported income too low to qualify for a traditional mortgage.
A bank statement loan was used, allowing the borrower to qualify based on 12 months of business bank statements instead of tax returns.
A real estate investor wanted to expand their portfolio but had no traditional employment income and was unable to qualify for conventional loans.
A DSCR Loan (Debt Service Coverage Ratio Loan) was used, qualifying the borrower based on rental income instead of personal income.
A freelance professional had only one year of self-employment and was denied by traditional lenders requiring two years of tax returns.
A 1099 Mortgage Loan was used, allowing qualification based on 12 months of 1099 earnings instead of W-2s or tax returns.
Whether you’re a freelancer, contractor, or small business owner, getting a mortgage doesn’t have to be a struggle. With more than 16 million self-employed individuals in the U.S., non-QM lenders understand that self-employed income is tricky and that tax returns are not the only source of verifiable income.
These lenders cater to this market with super creative loan options, including no requirement for 2 years of tax returns, higher allowable debt-to-income ratios, and alternative income verification methods.
With the right guidance and the right loan program, it’s possible to get approved even without tax returns or W-2s.
If you’re looking to buy a home, refinance, or simply explore your options, our team is here to help. We specialize in matching borrowers with creative solutions that work—so you can get a mortgage that fits your life.
Not all paths to purchasing or refinancing involve providing a tax return or a W-2 for the most recent two years.
Self-employed borrowers often require creative non-QM home loans due to their unique income structures. Every self-employed borrower has a unique income flow, which is why non-QM loans offer more flexible documentation options. Traditional lenders’ rigid requirements, including at least two years of tax returns and W-2s, may not accurately reflect their financial health.
Here are some common self-employment scenarios that are well-suited for non-QM loans:
Borrowers in these scenarios are typically unable to satisfy the stricter QM loan requirements. By contrast, non-QM lenders offer self-employed home loans with less stringent guidelines.
While being a self-employed borrower can present unique challenges, it is possible to get a mortgage with help. Many borrowers don’t get approved because they don’t know which lender to go to. The key lies in understanding the specific requirements and finding a lender who specializes in self-employed loans. These lenders offer flexible guidelines and understand the unique financial landscape of self-employed individuals.
The first hurdle for self-employed individuals is often providing income. Depending on the lender, you may need to provide tax returns, W-2s, or alternative documentation.
For a traditional conventional mortgage loan, the last two years of tax returns, W-2s, and pay stubs are typically required, which may not accurately reflect the income of a self-employed person. However, lenders specializing in self-employed loans often accept alternative forms of income verification, making it easier for self-employed individuals to demonstrate their earning capacity.
Additionally, these specialized lenders often have more flexible debt-to-income ratio guidelines. While traditional lenders may reject applications with high debt-to-income ratios, lenders catering to the self-employed understand that this ratio can be skewed for business owners and freelancers. These steps help simplify the mortgage approval process and improve your chances of getting approved—even without standard income proof.
You may still qualify even with less-than-perfect credit or under two years of self-employment. Many self-employed mortgage programs accept credit scores as low as 620-640. However, a higher credit score may result in better loan terms and lower interest rates, so it is a good idea to reduce your credit utilization by paying down some of your current credit card balances if possible.
Yes, even if you’ve been self-employed for less than 2 years, it’s possible to qualify for a loan with only 1 year of self-employment or even no income or employment verification at all (e.g., no-ratio or DSCR program). Non-QM lenders offer programs just for self-employed borrowers, understanding that not everyone can show an employment track record of 2 years.
Self-employed mortgages may have slightly higher interest rates compared to traditional mortgages due to risk factors. However, the exact cost difference varies based on credit history and down payment. Working with a mortgage broker can help you find competitive rates.
Mortgage lenders use different methods to calculate self-employed income, depending on the loan type. Traditional lenders may average the last two years of tax returns (IRS Form 1040, Schedule C), while non-QM lenders rely on bank statements, 1099s, or profit-and-loss (P&L) statements. Moreover, some lenders do not require any self-employment income proof at all, under the no-ratio or DSCR program.
Yes, no-ratio mortgage loans and DSCR loans allow self-employed borrowers to qualify with no income verification. For no-ratio mortgages (only applies for owner-occupied properties), your DTI isn’t calculated at all, and you don’t have to provide any income or employment documentation. For investment properties, under the DSCR program, the lender relies on the rental cash flow of the property, not your personal income.
Mortgage brokers provide access to exclusive self-employed mortgage loans not available through retail banks. They also connect borrowers with non-QM lenders who accept alternative income verification. They can also negotiate better loan terms by comparing multiple offers, simplify the application process, and increase approval chances.
The rise in self-employment home loans in Florida is not surprising. The state has seen a significant increase in the number of self-employed individuals and small businesses in recent years. This growth has been fueled by the state’s favorable business climate, including low taxes and a thriving tourism industry, which offers ample opportunities for entrepreneurs.
We can navigate you through the process.
