Qualifying for a mortgage can feel more complicated for small-business owners and self-employed individuals. Many mortgage lenders rely on tax returns to verify self-employed income, but these documents don’t always reflect the earnings of business owners, freelancers, or independent contractors.
Fortunately, there are mortgage solutions designed to accommodate these financial situations. At APM, we offer self-employed borrowers alternative ways to verify income and qualify for home financing.
Whether you’re a sole proprietor, an independent contractor, or running a full-scale business, we understand that traditional income documentation doesn’t always tell the whole story. That’s why APM provides a suite of non-QM (non-qualified mortgage) products that offer flexibility to self-employed borrowers, 1099 contractors, and our gig workforce.
These solutions allow you to use bank statements, profit and loss statements, and even assets to qualify. This means we can help you secure the financing you need to buy or refinance a home.
Overcoming Traditional Income Verification Challenges
Small-business owners often reinvest in their businesses, take advantage of tax deductions, and experience income fluctuations—factors that can make it challenging to meet traditional mortgage requirements. Instead of relying solely on tax returns, alternative loan programs evaluate financial health through different methods. These methods include analyzing bank deposits, profit and loss statements, or asset reserves.
With more than 16 million self-employed workers in the U.S., many of whom contribute significantly to the economy, there is a growing demand for mortgage solutions that recognize the realities of entrepreneurship.
APM is dedicated to making homeownership accessible to business owners by offering alternative methods tailored to their needs.
Traditional Qualifying with Tax Returns and P&L
For self-employed borrowers with consistent earnings, a traditional mortgage remains an option. This approach requires:
Two years of tax returns: Lenders review business and personal tax filings to assess income stability.
Current profit and loss statement: A recent P&L statement helps show ongoing income and business health.
This method is ideal for self-employed people whose reported income aligns with their actual earnings and who have a solid two-year income history.
If your tax returns show a steady income and minimal write-offs and business expenses, this could be a good route to homeownership. However, alternative mortgage solutions may be more suitable for those who take significant deductions and reduce taxable income.
Bank Statement Loans
This option allows borrowers to qualify based on their business bank statements and deposits rather than tax returns. By analyzing 12 to 24 months of bank statements, lenders can assess income based on cash flow rather than taxable earnings.
Who benefits from bank statement loans?
– Business owners who reinvest in their companies and take deductions to reduce taxable income.
– Independent contractors (1099)
– Gig economy workers receiving payments from multiple sources.
Since bank statement loans assess actual revenue from your accounts, they provide a more accurate picture of financial health than tax returns alone.
Asset-Based Qualification
Another flexible solution exists for those with substantial savings, investments, or retirement funds—using assets to demonstrate the ability to afford a mortgage payment.
Instead of relying on income documentation, this approach allows borrowers to qualify based on their liquid financial reserves. This method can provide a path to homeownership for those with irregular income streams but a strong asset portfolio.
How does asset-based qualification work?
– Lenders calculate a monthly income equivalent based on available assets.
– There’s no need for W-2s or tax returns, making this ideal for retirees, investors, or high-net-worth individuals.
– Flexible underwriting guidelines consider overall financial stability.
This type of loan is beneficial for self-employed people who have substantial wealth but minimal taxable income.
Key Considerations for Self-Employed Mortgage Solutions
While these home loan options provide greater flexibility, there are some requirements to keep in mind:
Third-party prepared P&L statements: In many cases, P&Ls must be prepared by a qualified tax professional to verify income.
Debt-to-income ratio flexibility: Some programs offer more lenient DTI requirements compared with traditional loans, making qualification easier.
Documentation requirements: Depending on the program, borrowers may need to provide 12 to 24 months of bank statements, P&L statements, 1099s, or proof of assets.
Larger down payment requirements: Some non-QM mortgages require a larger down payment to offset risk, but they provide greater flexibility in income verification.
For more tips on mortgage planning for self-employed borrowers, click here.
The Loan Process for Self-Employed Borrowers
Securing a mortgage as a self-employed person requires gathering the proper documentation upfront. Here’s what you can expect:
Determine the best option: Work with an APM Loan Advisor to find the right program to fit your financial situation. There is no one-size-fits-all when it comes to getting a mortgage; we recognize this at APM.
Prepare financial documents: Collect your past two years of tax returns, 12 months of bank statements, and a current profit and loss statement. You are also encouraged to provide other asset documentation that can verify your income and support financial stability. This includes investment accounts, personal cash reserve accounts, and your 401(k) and retirement accounts.
Submit the application: You will need to complete an application with your APM Loan Advisor and provide the documents outlined above to begin the pre-approval and approval process.
Underwriting review: Once your Loan Advisor has everything they need, they will package up your file and send it to underwriting to assess your income stability, debt-to-income ratio, and reserves to determine loan approval.
Loan approval: Once your loan is approved, we’ll work with you to finalize your mortgage and move forward with your home purchase or refinance.
Additional Mortgage Options
For self-employed borrowers who may not qualify for alternative income verification programs, other mortgage options are available. FHA loans and VA loans, for example, provide financing solutions that may accommodate unique financial situations.
Additionally, APM offers flexible guidelines through our non-QM loans that can require a larger down payment to offset the variability of self-employed income. Our mortgage professionals specialize in helping self-employed borrowers navigate their options and find the best path to homeownership.
Why choose APM for your mortgage needs?
Tailored loan programs: We specialize in solutions that cater to business owners and entrepreneurs.
Expert guidance: Our Loan Advisors understand self-employed income complexities and will guide you through the process.
Flexible qualification methods: From bank statement loans to asset-based lending, we provide multiple ways to qualify.
Competitive rates and terms: Get the best possible mortgage terms based on your financial profile.
Find the Right Mortgage for Your Needs
If you are self-employed and looking for a mortgage solution that fits your financial situation, we’re here to help. Contact an APM Loan Advisor today to explore flexible loan options designed for business owners, freelancers, and independent professionals.
Whether you are purchasing a new home, refinancing, or looking for an investment property, we have mortgage solutions that work for you.
Don’t let complex income verification stand in the way of homeownership—let APM help you secure the loan that fits your business and lifestyle!