For self-employed borrowers who write off a large portion of their income on taxes, traditional mortgage qualification can be difficult because conventional underwriting looks primarily at net taxable income, not gross business revenue.
Specialized loan programs are designed to address this challenge by using alternative ways to verify income.
Key program types:
- Bank Statement Loans
- Instead of tax returns, lenders review 12–24 months of personal or business bank statements to calculate qualifying income based on deposits.
- Allows deductions on tax returns to be ignored since they’re not part of the calculation.
- 1099-Only Loans
- Uses your 1099 income statements (common for contractors, gig workers, and freelancers) rather than full tax returns.
- Often averages 1–2 years of 1099 income.
- Profit & Loss (P&L) Statement Loans
- Lender accepts a CPA-prepared P&L statement (sometimes with business bank statements) instead of tax returns.
- Useful if you have strong cash flow but low taxable income.
- Asset Depletion Loans
- Uses your liquid assets (savings, investments, retirement accounts) as a basis to calculate “income” by dividing assets over a set period.
- Works for high-asset, low-reported-income borrowers.
Benefits for self-employed borrowers:
- Uses real cash flow, not just taxable income – Makes qualification possible even if tax deductions reduce reported earnings.
- Flexibility in documentation – Multiple ways to prove income beyond standard W-2 or tax return methods.
- Access to larger loan amounts – Can qualify based on gross business revenue rather than net income.
- Entrepreneur-friendly – Recognizes that self-employed finances look different from salaried workers.
- Can pair with competitive rates – While rates may be slightly higher than conventional loans, the ability to purchase or refinance sooner often outweighs the cost.