How To Get a Mortgage When Self-Employed


Qualifying for a mortgage when you’re self-employed may require a few additional steps, but it’s possible. Most lenders will want to see at least two years of financial documents to verify your income, and thus your ability to repay the loan. If you satisfy all lender requirements and successfully prove your creditworthiness and financial stability, buying your dream abode is 100% achievable, even when you work for yourself.

Working for oneself is a dream job for many. You get to set your own hours and not worry about being late to the office. However, self-employment is not all sunshine and rainbows. One common hurdle freelancers and solopreneurs face in their careers is the challenge of securing a mortgage.

While being self-employed doesn’t necessarily lower your chances of getting approved for a mortgage, you may have to provide additional documents to prove your financial security. Here’s everything you need to know about applying for a mortgage when you’re your own boss.

Mortgage loan requirements for self-employed borrowers

The mortgage loan requirements for self-employed applicants can vary by lender, but some of the most common requirements include the following:

  1. Two years of proof of income. Self-employed individuals must provide one of the following documents to prove their income:
    • Two years of personal income tax returns
    • Two years of business tax returns, including Schedules K-1, 1120, and 1120-S
    • Year-to-date profit and loss statement (P&L)
    • Balance sheet
  2. Employment verification. Along with your mortgage application, you may need to include certain letters, emails, or documents to prove you’re self-employed, such as the following:
    • Emails from your current clients
    • A letter from a Certified Public Accountant (CPA)
    • A state or business license you hold
    • A Doing Business As (DBA)
  3. Good credit score. Credit score requirements vary by lender, but most prefer borrowers with credit scores of at least 620. Aim for a credit score of 700 or above to get the lowest interest rate possible.
  4. Financial reserves. Lenders will also want to see that you have significant cash reserves in the bank to help you cover your mortgage payments in case of any unexpected financial emergencies or a decrease in your workload.
  5. Low debt-to-income ratio. Like with credit scores, DTI ratio requirements vary by lender. Generally, you’ll want to keep yours below 43% to increase your likelihood of getting approved for a mortgage.

Pro Tip

Consider working with a mortgage broker to help you navigate the complexities of applying for a mortgage as a self-employed borrower. Brokers often have connections with lenders who specialize in lending to self-employed individuals.

How to get a mortgage when self-employed: A step-by-step guide

Securing a mortgage can be intimidating if you’re a first-time homeowner who also runs their own business. Here’s a quick step-by-step guide on how to get a mortgage if you’re self-employed:

1. Check your credit report

Your credit score plays a huge role in determining your eligibility for a mortgage. Before you even start shopping for lenders, review your credit report and check for any inconsistencies or errors. If you spot any inaccurate negative information on your credit report that may be lowering your credit score, file a dispute with the credit bureau to fix the mistake.

2. Determine the type of loan you need

The type of mortgage you need depends on various factors, such as your credit score, your income, the amount you want to borrow, and the property you plan to finance. Popular types of loans for self-employed individuals include traditional mortgages backed by Fannie Mae and Freddie Mac and government-backed loans such as Federal Housing Administration, VA, and USDA loans. Be sure to thoroughly research each type of loan so you fully understand your options before you apply.

3. Gather the required financial documents

If you’re a self-employed borrower, lenders will need additional documentation to validate your business income and financial standing to ensure you won’t default on the loan. Before applying for a mortgage, make sure you gather the required documents, including your most recent tax returns (typically two years), recent business bank statements, and proof of your assets and liabilities.

4. Obtain and compare quotes from different lenders

Once you have your documents in order, it’s time to shop around for mortgage lenders! Take the time to comparison-shop and consider factors such as interest rates, loan terms, and other charges to find the best fit.

Most experts recommend requesting quotes from at least three lenders when shopping for a home loan. Remember that a quote is not a commitment; nothing is set in stone until you sign on the dotted line!

5. Submit a final mortgage loan application

After you’ve compared interest rates and fees and chosen your preferred lender, you need to submit a final loan application. During the underwriting process, the underwriter will verify all your financial information to determine whether you’re eligible for the loan. If approved for the loan, you’ll then receive a mortgage offer, which you’ll sign and return to your lender. Make sure you understand all the terms before signing your mortgage contract.

And that’s it! Congratulations, you’ve successfully applied for a mortgage as a self-employed borrower!

How to increase your chances of getting approved for a mortgage

As mentioned previously, getting approved for a mortgage as a self-employed business owner may require additional steps, as income stability tends to be less certain with self-employment income. Don’t worry, though; you can boost your odds of being approved for a home loan by optimizing your finances and credit health.

Here are a few tips to increase your chances of getting a mortgage as a self-employed borrower:

Lower your debt-to-income ratio

Your debt-to-income ratio (DTI) is calculated by dividing your total monthly debt payments by your gross monthly income. For example, if your total monthly debts add up to $2,000 and your gross monthly income is $6,000, your debt-to-income ratio is 33%. A good rule of thumb is to keep your debt-to-income ratio below 43% (or 36% if you want to qualify for mortgages with better terms).

Have a long self-employment history of steady income

Mortgage lenders will be more willing to take a chance on you if you can show that you’re a pro in the self-employment game. Ideally, this means generating stable and increasing income every year. If you’re planning to take out a mortgage in the near future, you’ll want to keep your average monthly income as consistent as possible and look for ways to increase your revenue to make yourself a more attractive candidate for a home loan.

Boost your credit score

No matter how much money you make as a freelancer or independent contractor, if your credit score is poor, lenders will see you as a risk and charge you higher interest rates. To increase your odds take the time to max out your credit score before submitting your loan application.

Offer a large down payment

The more money you pay upfront, the smaller your loan will be, which means lower monthly mortgage payments for you and less risk for the lender. Simply put, if you end up defaulting on the loan, the lender won’t feel the same financial punch because they’ve already received a good chunk of change from you. Plus, a larger down payment upfront that lowers the risk for the lender may entice the loan officer to offer you better terms on your mortgage.

Become a co-borrower with a spouse or partner

Ari Chazanas, licensed real estate agent and CEO of Lotus West Properties, says, “Applying for a joint mortgage with a spouse will give lenders more confidence in your ability to repay the loan because they’ll know that someone else is on board too. If anything happens to one of you — say, if one of you loses your job — the other person would still be able to make their monthly payments.”

Increase your cash reserves

Along with making a larger down payment, you can also increase your chances of getting better mortgage terms by having plenty of money in your savings. A healthy cash reserve shows lenders that even if your business takes a nosedive, you’ll still be able to cover property taxes, homeowners insurance, and any home maintenance costs.

Pay off any outstanding debt

If you’re drowning in debt, that signals to future lenders that you may have trouble affording your mortgage payments. Before applying for a mortgage as a self-employed borrower, pay off any outstanding consumer debt, such as high-interest credit card debt or car loans. Plus, when you have fewer financial obligations, you’ll have a higher cash flow, which means you may be able to qualify for a higher mortgage loan amount.

Pro Tip

Lenders only count taxable income toward your mortgage. This means that although taking multiple deductions could save you money on your taxes, it could also negatively impact your mortgage application. Be sure to talk to a tax professional before filing your taxes if you plan on taking out a mortgage soon.


Is it hard for self-employed borrowers to get a mortgage?

Securing a mortgage when you’re self-employed can be challenging, since it may require more steps than if you were an employee at a company. That said, it’s definitely possible. Just remember that most mortgage lenders will require you to have at least two years of uninterrupted self-employment income before you can qualify for a home loan. You may also need to prove that you have reliable income by providing bank statements and other financial documentation.

What credit score do you need for a mortgage if you’re self-employed?

Credit score requirements vary from lender to lender, but you’ll generally need a credit score of at least 620 and a DTI ratio no higher than 43% to qualify for mortgages with good terms. If you’re not sure where you stand in terms of your credit health, head to to order a free copy of your credit report.

How do lenders approve a mortgage for self-employed borrowers?

The loan approval process for a self-employed individual is similar to that for a W-2 salaried employee. Mortgage lenders will want to see employment and income documents, such as your business license, two years of federal income tax returns, recent bank statements, and profit and loss statements. Be sure to have these documents ready before you apply for a mortgage as a self-employed business owner.

Can I buy a house if I have either a W-2 or a 1099?

Yes, you can apply for a mortgage to purchase a house whether you’re a freelancer or a 9-to-5 employee at a company. However, buying an abode with a 1099 income may come with additional hurdles. Lenders will closely examine your tax returns from the last two years to ensure you’re financially stable enough to repay your mortgage.

How do I prove my self-employed income?

If you have a traditional job, paystubs and W-2s are typically sufficient to prove your ability to afford a mortgage. Self-employed individuals, on the other hand, need to prove their self-employed income by providing at least one of the following:

  • Two years of personal tax returns
  • Two years of business tax returns, including Schedules K-1, 1120, and 1120-S
  • Year-to-date profit and loss statement
  • Balance sheet

Key Takeaways

  • Mortgage approval can be slightly more challenging for self-employed borrowers, but it’s possible if you have the necessary documentation and financial stability.
  • To be eligible for a mortgage, self-employed individuals typically need to provide two years of proof of income through tax returns, P&L statements, and/or balance sheets.
  • Some ways you can increase your chances as a self-employed borrower include lowering your DTI ratio, building a stable self-employment history, boosting your credit score, offering a larger down payment, having significant cash reserves, and paying off your outstanding debt before submitting your mortgage application.

Steve Silver, mortgage broker and owner of, says, “With satisfactory proof of income (amount, duration, and likelihood to continue) and debt-to-income ratios/credit scores within guidelines, there’s no difference between a self-employed and ’employed’ borrower to a lender.”

In short, don’t be discouraged if you’re applying for a mortgage as a freelancer or solopreneur. Though you may need to provide extra documents to prove your financial stability, your chances of getting approved for a mortgage will not be affected by your employment situation.

Remember, to snag the best deal on your mortgage, be sure to obtain quotes from at least three lenders. If you need help narrowing down your options, check out SuperMoney’s top picks for the best mortgage lenders!

View Article Sources
  1. B3-3.2-01, Underwriting Factors and Documentation for a Self-Employed Borrower – Fannie Mae
  2. Stable monthly income and documentation requirements for self-employed borrowers – Freddie Mac
  3. Debt to Income Ratio: More Important Than Credit Score? – SuperMoney
  4. What Is a Conforming Loan? – SuperMoney
  5. Struggling with Record-High Credit Card Debt? Try This Method to Pay it Off – SuperMoney
  6. Tax Deductions and Credits List: Complete Guide for 2023 – SuperMoney
  7. How to Get a Mortgage Without Two Years of Work History – SuperMoney
  8. How to Apply for a Mortgage? A Guide for First-Time Homebuyers – SuperMoney
  9. How to Calculate Self-Employed Income for Mortgage Loans — SuperMoney