Self-employed borrowers usually qualify on the average of their last two years of income after business expenses, as shown on their tax returns, with some non-cash deductions like depreciation added back. If your taxable income is low because of write-offs, bank statement loans and other non-QM loans can qualify you on deposits instead, at higher rates.
How lenders calculate your income
For most conventional, FHA and VA loans, lenders start with the net profit on your tax returns (Schedule C for sole proprietors, or your share of business income for partnerships and S corporations), then add back certain non-cash expenses such as depreciation, depletion, some business use of home and amortization. They usually average two years.
Try it: Self-employed income calculatorEnter two years of net profit and add-backs to estimate the qualifying income a lender would use.Trends matter
If your income rose, lenders usually average the two years. If it fell, many use only the lower, more recent year, and a large drop can require an explanation or make it hard to qualify. One strong year after a weak one won’t count fully.
How long you need to be self-employed
Two years of self-employment history is the standard. Some programs accept one year if you worked in the same field before, as an employee, with similar or higher income.
The write-off trade-off
Deductions lower your taxes, and also your qualifying income. If you plan to buy within a year or two, talk to your accountant about how your next returns will look to a lender. Paying a little more tax can raise what you can borrow by much more.
Alternatives to tax-return loans
- Bank statement loans: qualify on 12 or 24 months of business or personal deposits, minus an expense factor.
- Asset depletion: qualify on large savings or investments divided over a set period.
- DSCR loans for investment properties qualify on the rental income instead of yours; see the DSCR calculator.
These non-qualified mortgages usually cost more (higher rates and fees) and often require 10% to 20% down. Compare them with a conventional option using compare mortgage offers.
Documents to prepare
- Two years of personal and business tax returns, with all schedules.
- A year-to-date profit and loss statement, sometimes prepared by an accountant.
- Business license or CPA letter confirming you’re in business.
- Several months of personal and business bank statements.
Use the pre-approval document checklist, then see your likely budget with the affordability calculator using your qualifying income.
Common questions
How many years of self-employment do I need for a mortgage?
Usually two. Some programs accept one year if you previously worked in the same field with similar income.
Do write-offs hurt my mortgage application?
They lower your qualifying income, which lowers what you can borrow. Depreciation and some other non-cash expenses are added back.
What is a bank statement loan?
A non-QM loan that qualifies you on 12 or 24 months of deposits instead of tax returns, usually at a higher rate with a larger down payment.
Updated October 2026. Educational content. OfferBacked is not currently a lender and doesn’t issue pre-approvals or loans.