Published , 3 minute read
Yes, self-employed Texans can get a mortgage. Learn how lenders calculate business income, what documents you need, and when a bank statement loan makes sense.
Quick answer: Yes. Self-employed borrowers in Texas get mortgages every day, including conventional, FHA, and VA loans. Most programs want about two years of self-employment history and use your tax returns to calculate income, usually averaging the last two years of net income after deductions. If your write-offs make your taxable income look low, alternative documentation programs — such as bank statement loans — can qualify you based on actual cash flow instead.
Who counts as self-employed?
For mortgage purposes, you're generally considered self-employed if you own 25% or more of a business, or if you're paid on a 1099 instead of a W-2. That includes sole proprietors, LLC owners, S-corp and partnership owners, independent contractors, consultants, real estate agents, and many commissioned professionals.
How lenders calculate self-employed income
On standard loans, lenders don't use your gross revenue. They use your net income from your tax returns.
- Two-year average. Lenders typically average your last two years of qualifying income.
- Trend matters. If income dropped from one year to the next, the lender may use the lower year or need an explanation.
- Some deductions get added back. Certain non-cash deductions, like depreciation, depletion, and amortization, and some other items can be added back to your income because they didn't actually cost you cash that year.
- Business debts count too. Business-related debt in your personal name may be counted unless the business pays it and you document that.
This is why a business owner who earns strong cash flow can show a much lower "qualifying income" on paper.
How long do I need to be self-employed?
Two years is the standard for most programs. Some files can qualify with 12 to 24 months of self-employment if you have a strong history in the same line of work beforehand — for example, a nurse who became an independent contractor nurse, or a loan officer who opened their own brokerage. Less than a year on your own usually means waiting or exploring alternative programs.
Documents you'll typically need
- Personal tax returns (usually 2 years), with all schedules
- Business tax returns (usually 2 years) if you own a partnership or corporation
- K-1s, if applicable
- Year-to-date profit and loss statement (sometimes required)
- Business and personal bank statements
- Proof that your business is active, such as a business license, CPA letter, or website
Automated underwriting sometimes reduces these requirements, for example, to one year of returns.
Alternative documentation (bank statement) loans
If your tax returns don't reflect what you really earn, a bank statement loan — a type of alternative documentation (non-QM) program — may fit. Instead of tax returns, the lender reviews 12 to 24 months of personal or business bank deposits to estimate income.
Things to know:
- Down payments are typically higher, often 10% or more.
- Rates and costs are usually higher than conventional loans.
- Some borrowers use a bank statement loan to buy now, then refinance into a conventional loan later once their tax returns support it.
Other alternative options include asset-based programs (for borrowers with significant savings or investments) and 1099-only programs for independent contractors.
Plan ahead with your CPA
The best time to talk to a loan officer is before you file your taxes. Your CPA's job is to minimize your tax bill legally; your loan officer's job is to show what income a lender will see. When they coordinate, you can make informed tradeoffs — for example, understanding how a large deduction will affect what you qualify for next year.
FAQ
Can I get a mortgage with one year of self-employment? Sometimes, if you have prior experience in the same field and strong overall credentials. Otherwise, you may need to wait or use an alternative documentation program.
Do lenders use gross or net income for self-employed borrowers? Net income, after business expenses, with certain non-cash deductions added back.
Can I use business funds for my down payment? Often, yes, with documentation showing that withdrawing the funds won't harm the business.
Is a bank statement loan a bad idea? Not necessarily. It costs more, but for the right borrower it can be the bridge to owning a home sooner. Compare the total cost with your loan officer.
Self-employed and not sure how a lender will see your income? Call or text Mike Tanas at 214-604-5245
This article is general education, not financial, tax or legal advice. Guidelines change and vary by lender. Talk with Mike about your own situation.