Can Self-Employed People Get a Mortgage?

Getting a mortgage when you’re self-employed can feel like navigating a maze blindfolded. You’ve probably heard horror stories from fellow freelancers about being rejected by lenders or jumping through endless hoops just to get approved.

Maybe you’re wondering if it’s even possible for self-employed people to get a mortgage at all.

I’ve got good news: yes, self-employed people absolutely can get mortgages. But I’ll be straight with you—it’s going to take some extra work compared to your W-2 employed friends.

After spending over a decade working with thousands of freelancers through my blog and online community, I’ve seen countless self-employed individuals successfully secure mortgages. But I’ve also witnessed many unnecessary rejections that could have been avoided with proper preparation.

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Why Getting a Mortgage is Different for Self-Employed People

Let’s address the elephant in the room: lenders are more cautious with self-employed mortgage applicants. It’s not personal—it’s business.

When someone has a traditional job, lenders can easily verify their employment status and income by contacting their employer. But when you’re the boss, things get more complicated.

Here’s what makes the self-employed mortgage process different:

Income Verification Challenges

Traditional employees have predictable paychecks and W-2 forms that make income verification straightforward. Your income as a freelancer or business owner likely fluctuates month to month, making it harder for lenders to assess your financial stability.

Tax Deduction Disadvantage

As a savvy self-employed person, you probably take advantage of tax deductions to minimize your taxable income. While that’s great for reducing your tax bill, it can backfire when applying for a mortgage since lenders look at your taxable income to determine how much you can borrow.

Perception of Risk

Fair or not, some lenders view self-employment as inherently riskier than traditional employment. They worry about the sustainability of your business and income, especially during economic downturns.

Despite these challenges, securing a mortgage while self-employed is absolutely achievable with proper preparation and documentation.

What Lenders Look for When You’re Self-Employed

Before diving into the “how,” let’s understand what mortgage lenders are actually looking for when evaluating self-employed applicants.

Stable and Sufficient Income

Lenders want to see that your business generates enough consistent income to comfortably cover mortgage payments. They typically look at your average income over the past two years, not just your most recent earnings.

Business Stability

Is your business likely to continue generating income into the future? Lenders assess this by looking at your business history, industry outlook, and business structure.

Strong Credit Profile

Your credit score matters just as much for self-employed borrowers as for traditional employees. A high score demonstrates responsible financial management, which can help offset some of the perceived risks of self-employment.

Manageable Debt-to-Income Ratio

Lenders calculate your debt-to-income ratio (DTI) by dividing your monthly debt payments by your gross monthly income. They want to see that your debts, including the potential mortgage, don’t consume too much of your income.

Significant Down Payment

While not always required, having a larger down payment can strengthen your application by reducing the lender’s risk and potentially securing better loan terms.

Essential Documentation for Self-Employed Mortgage Applicants

Now for the nuts and bolts: what paperwork will you need to provide as a self-employed mortgage applicant? Prepare to gather significantly more documentation than your traditionally employed friends.

Business Verification Documents

You’ll need to prove your business exists and that you’re actively running it. Acceptable forms of verification include:

• Business License or Registration: Official documentation showing your business is legally registered.
• Client Statements: Letters or emails from current clients confirming your ongoing business relationship.
• CPA Verification: A letter from your accountant verifying your business operations.
• Professional Membership: Documentation from professional organizations that verify your active membership.
• Business Insurance Policies: Active insurance coverage for your business.
• “Doing Business As” (DBA) Certificate: If you operate under a business name different from your legal name.

Income Documentation

This is where things get really detailed. To prove your income as a freelancer, you’ll need:

• Personal Tax Returns: Typically for the past two years, including all schedules.
• Business Tax Returns: For the past two years if your business is a corporation, partnership, or LLC. This may include Schedule C, Form 1120-S, or K-1 forms depending on your business structure.
• Profit & Loss Statements: Current year-to-date P&L statements, which may need to be prepared or reviewed by a CPA.
• Bank Statements: Both personal and business bank statements for the past 2-3 months (sometimes up to 12 months for certain lenders).
• 1099 Forms: If you receive them from clients.

Other Financial Documentation

Asset Statements: Documentation of your retirement accounts, investments, and other assets.

Debt Statements: Information about your current debts, including credit cards, loans, and other mortgages.

Proof of Down Payment: Documentation showing where your down payment funds are coming from.

I know what you’re thinking—that’s a mountain of paperwork! But being organized and prepared with these documents will significantly smooth the application process.

Overcoming the 2-Year Self-Employment Requirement

One of the biggest hurdles for newly self-employed individuals is the common requirement that you have two years of self-employment history. But don’t despair if you’ve been self-employed for less time—there are exceptions.

You may still qualify if:

You’ve been self-employed for at least one year AND previously worked in the same field as an employee for several years. Lenders may consider your prior related employment as part of your work history.

You can demonstrate exceptional strength in other areas of your application, such as a large down payment, excellent credit score, significant cash reserves, or very low debt-to-income ratio.

You’re willing to explore non-conventional loan options such as FHA loans, which sometimes have more flexible requirements for self-employed borrowers.

If you’ve been self-employed for less than two years, be prepared to provide additional documentation about your previous employment and education that supports your current business venture.

6 Proven Strategies to Strengthen Your Mortgage Application

Now that you understand the challenges and requirements, let’s talk about how to position yourself for success. Here are six strategies that successful self-employed borrowers use to improve their chances of mortgage approval:

1. Minimize Tax Write-Offs Before Applying

This strategy requires advance planning. While maximizing deductions reduces your tax bill, it also reduces your reported income—which lenders use to determine how much you can borrow. Consider reducing your business deductions for 1-2 years before applying for a mortgage to show higher income.

Yes, you’ll pay more in taxes, but the trade-off might be worth it if it helps you qualify for your dream home. This is a conversation worth having with your accountant or financial advisor.

2. Improve Your Credit Score

As a self-employed borrower, you’re already perceived as somewhat riskier—don’t compound this with a mediocre credit score. Take steps to boost your score before applying:

• Pay down credit card balances to reduce your credit utilization ratio.
• Avoid applying for new credit in the months leading up to your mortgage application.
• Check your credit reports for errors and dispute any inaccuracies.
• Make all payments on time, every time.

Aim for a score of at least 700, though 740+ will typically qualify you for the best rates.

3. Lower Your Debt-to-Income Ratio

Lenders typically want to see a DTI ratio below 43%, though lower is better. To improve your DTI:

• Pay down existing debts before applying, particularly high-interest credit cards.
• Avoid taking on new debt in the year leading up to your mortgage application.
• Consider paying off vehicle loans or consolidating debts to reduce monthly obligations.

4. Save for a Larger Down Payment

While conventional mortgages may accept down payments as low as 3-5%, self-employed borrowers often benefit from making larger down payments—aim for 20% or more if possible. This not only reduces the lender’s risk but also eliminates the need for private mortgage insurance (PMI), saving you money each month.

5. Maintain Clean Banking Habits

Lenders will scrutinize your bank statements, so practice good banking habits:

• Keep business and personal finances separate with dedicated accounts for each.
• Avoid large, unexplained deposits or transfers between accounts.
• Maintain sufficient cash reserves to cover several months of mortgage payments.
• Document any large deposits with clear explanations of their source.

6. Consider Working with a Mortgage Broker

Mortgage brokers who specialize in working with self-employed borrowers can be invaluable. They:

• Know which lenders are most friendly to self-employed applicants.
• Can help you present your financial situation in the most favorable light.
• May have access to portfolio lenders who keep loans on their books rather than selling them, allowing for more flexible qualification criteria.

Taking these strategic steps won’t guarantee approval, but they’ll significantly improve your chances and potentially qualify you for better rates and terms.

Alternative Mortgage Options for Self-Employed Borrowers

If you’re struggling to qualify for a conventional mortgage, don’t give up. Several alternative options cater to self-employed individuals:

Bank Statement Loans

These mortgages use your bank statements rather than tax returns to verify income. Lenders typically look at 12-24 months of deposits to calculate your average monthly income. While convenient, these loans usually come with higher interest rates and may require larger down payments.

FHA Loans

Federal Housing Administration loans often have more flexible requirements for self-employed borrowers. You may qualify with just one year of self-employment history if you can demonstrate previous experience in the same field. Down payments can be as low as 3.5%.

Portfolio Loans

Some lenders keep certain mortgages in their own portfolio instead of selling them on the secondary market. This gives them more flexibility in their approval criteria, potentially making it easier for self-employed borrowers to qualify.

Asset-Based Loans

If you have significant assets but irregular income, some lenders offer mortgages based primarily on your assets rather than income. These can be particularly helpful for self-employed individuals with substantial investments or retirement accounts.

VA Loans

If you’re a veteran or active-duty service member who happens to be self-employed, VA loans offer favorable terms and potentially more flexible qualification criteria.

These alternative options typically come with trade-offs like higher interest rates or fees, but they can be valuable pathways to homeownership for self-employed individuals who don’t fit neatly into conventional mortgage criteria.

The Mortgage Application Timeline for Self-Employed Borrowers

Self-employed mortgage applications typically take longer than those for traditional employees. Here’s a realistic timeline to help set your expectations:

3-6 Months Before Applying:

• Start organizing your financial documents
• Work on improving your credit score
• Pay down debts to improve your DTI ratio
• Begin researching lenders and mortgage options

1-3 Months Before Applying:

• Get pre-approved to understand your price range
• Avoid major purchases or new credit applications
• Prepare your down payment funds
• Maintain consistent banking patterns

Application Process (30-60 days):

• Submit your initial application
• Respond quickly to requests for additional documentation
• Complete home appraisal and inspection
• Address any underwriting concerns
• Close on your new home

Plan for a 45-60 day closing timeline from application to keys-in-hand, though it could take longer depending on your specific situation and the lender’s requirements.

Where to Find Freelance Work to Boost Your Income

If you’re concerned about demonstrating sufficient income for a mortgage, one solution is to increase your freelance earnings. SolidGigs is a premium lead generation tool for freelancers that can help you find higher-paying clients in your field. Unlike other freelance job boards, SolidGigs hand-picks the best opportunities and delivers them directly to your inbox each week, saving you hours of searching.

Having a steady pipeline of quality freelance work not only boosts your income but also helps demonstrate to lenders that your self-employment is stable and sustainable—exactly what they’re looking for when approving mortgages for self-employed applicants.

Final Thoughts: Yes, Self-Employed People CAN Get Mortgages

The bottom line is clear: self-employed people absolutely can get mortgages, but it takes more preparation, documentation, and sometimes strategic financial planning compared to traditionally employed borrowers.

Remember these key takeaways:

• Plan ahead – Start preparing at least 6-12 months before you want to apply
• Document everything – Be meticulous about organizing your financial paperwork
• Consider the tax trade-off – Sometimes paying more taxes to show higher income is worth it
• Explore all options – Don’t give up if one lender says no; others may have different criteria
• Work with specialists – Find mortgage professionals who understand self-employed finances

The path to homeownership might be a bit more winding for the self-employed, but thousands of freelancers and business owners successfully navigate it every year. With proper preparation and persistence, you can join them.

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One more thing...

You didn't start freelancing to spend hours every week searching through job boards. You started freelancing to do more work you enjoy! Here at SolidGigs, we want to help you spend less time hunting and more time doing work you love.

Our team of "Gig Hunters"—together with the power of A.I.—sends you high-quality leads every weekday on autopilot. You can learn more or sign up here. Happy Freelancing!

Preston Lee

Preston has worked for over 15 years as a freelancer. He works as a writer, a designer, and a developer and has been featured by Adobe, Forbes, Inc, Entrepreneur, and many more.