Self-employed buyers qualify one of two ways. A tax-return loan uses your income after write-offs. A bank-statement loan uses your deposits instead. Tax-return loans usually cost less. Bank-statement loans help when your deductions make your income look smaller than it is.
Guidelines checked against Fannie Mae’s Selling Guide and CrossCountry Mortgage’s program page on October 25, 2026.
The two ways to qualify
| Tax-return loan (conventional or FHA) | Bank-statement loan | |
|---|---|---|
| Income the lender uses | Your net income after business deductions, usually averaged over two years | Your deposits over 12 or 24 months |
| Documents | Usually two years of personal tax returns, and business returns if you own the business | 12 to 24 months of bank statements; no tax returns, W-2s or pay stubs |
| Self-employment history | Usually two years; sometimes less with a full year in the business and the same work before | At least two years for CrossCountry’s program |
| Down payment | Standard conventional or FHA minimums | Larger than a standard loan; more with lower credit |
| Rate | Standard market rates | Usually higher than a conventional loan |
| Other requirements | Standard agency rules | Debt-to-income up to 50% and proof of savings, under CrossCountry’s program |
| Works with down payment assistance | Often, through programs such as LHC HomeStart | Ask first; assistance programs are built around standard loans |
Who counts as self-employed
If you own 25% or more of a business, Fannie Mae treats you as self-employed. That’s true whether the business is a sole proprietorship, an LLC or an S-corp.
Why write-offs change what you can borrow
A tax-return loan qualifies you on the income your returns show, after deductions. The deductions that lower your tax bill also lower the income a lender can count.
For example, a contractor who brings in $120,000 a year but deducts $60,000 in expenses shows about $60,000 of income on paper. A lender qualifies that buyer on $60,000. A bank-statement loan starts from the deposits instead.
I started my career in tax at KPMG, so reading business returns is familiar ground for me. I add back the most deductions possible for the highest income, but when the tax return income isn’t enough, it’s good to know we can pivot to a bank statement loan to help clients purchase their new homes.
When one year of tax returns is enough
Fannie Mae allows one year of personal returns instead of two when your business has existed for five years, you’ve owned at least 25% of it for those five years, and the lender completes a cash flow analysis of your income.
Business returns can sometimes be skipped too. That takes five years in the same business, rising income from it over the last two years, and your own personal funds for the down payment, closing costs and reserves.
Which path fits you
- Returns show enough income? Start with a tax-return loan. It usually has the lower rate and can pair with down payment assistance.
- Write-offs leave too little on paper? A bank-statement loan may qualify you on what you actually deposit.
- Income dropped last year? Expect the lender to ask why. Underwriters look for steady or rising income on either path.
- Self-employed less than two years? A tax-return loan may still work if your latest returns show a full year from the business and you earned the same or more in the same kind of work before. Bank-statement programs usually need two years.
Before you apply
- Talk to your CPA before you file. If you plan to buy in the next year or two, ask how your deductions will affect the income a lender can use.
- Keep business and personal accounts separate. Clean statements make a bank-statement loan much easier to document.
- Gather two years of returns and 24 months of statements. With both, your loan officer can compare the two paths side by side.
- Plan for reserves. Lenders often want money left in the bank after closing, especially on bank-statement loans.
- Budget for New Orleans insurance. Homeowners and flood insurance count in your debt-to-income ratio, and premiums here run high, so get quotes early.
How I help self-employed buyers
Before you shop, I look at your income both ways: on your tax returns and on your bank statements. Then you can see which loan fits the home you want, and what each one costs. Many of the self-employed clients I work with come to me from their CPA or financial planner.
One client, a self-employed stylist, showed too little income on her tax returns to qualify for a new tax-return-based mortgage before she sold her current home. We used both her personal and business bank statement deposits to qualify using the bank statement loan. She closed on her new home before losing out to a competing buyer.
Common questions
Can I get a mortgage with only one year of self-employment?
Sometimes. Fannie Mae can accept less than two years if your most recent signed returns show a full 12 months of income from the business, and you earned the same or more in the same type of work before.
Do bank-statement loans cost more?
Usually. They typically carry a higher rate and need a larger down payment than a conventional loan. The trade-off is qualifying on income your tax returns don’t show.
Can I use personal or business bank statements?
It depends on the program. Ask your loan officer which statements they’ll use and how they’ll count business expenses, because that decides your qualifying income.
Can I refinance later into a lower rate?
Sometimes. If your later tax returns show enough income, a conventional refinance may lower your rate. That depends on rates and your situation at the time.
If you want me to look at your income both ways, call me at 504-939-1704 or start an application below.
Sources
- Fannie Mae Selling Guide: Underwriting factors and documentation for a self-employed borrower
- CrossCountry Mortgage: Bank statement loan program
Written by Will Gandy, NMLS #93583, lending in New Orleans since 2003. CrossCountry Mortgage, LLC NMLS3029. Branch NMLS #1678577. 802 Fern St Ste 301, New Orleans, LA 70118. Equal Housing Opportunity. All loans subject to underwriting approval. Certain restrictions apply. Rates, terms and program availability may change. This is educational information, not a commitment to lend. Licensing information: www.nmlsconsumeraccess.org.