What lenders really look for
Being self-employed offers freedom, flexibility, and control—but when it comes to getting a mortgage, it also adds a layer of documentation most traditional W-2 borrowers never have to think about. The good news? Self-employed buyers get approved every day. Lenders simply need a clear, consistent picture of your income.
If you own a business, freelance, consult, or earn 1099 income, here’s exactly how the pre-approval process works and what lenders focus on most.
Tax Returns: Your Most Important Documents
For self-employed borrowers, tax returns matter far more than pay stubs. Lenders use them to calculate your true, averaged income.
You’ll typically need:
- Two years of personal tax returns
- Two years of business tax returns (if applicable)
- All schedules and attachments
Instead of looking at gross revenue, lenders use net taxable income as the foundation for affordability.
Business Income: The Story Behind the Numbers
Lenders want to see that your income is:
- Consistent
- Stable
- Reasonably predictable
They review patterns over the past two years to ensure your business isn’t on a downward trend. An occasional dip is fine—what matters is the overall direction.
Profit and loss statements, K-1s, and business bank statements can all help clarify year-to-year fluctuations.
Add-Backs: Your Secret Advantage
Most self-employed buyers write off expenses to reduce taxable income. Lenders know this—and they add certain deductions back into your qualifying income.
Common add-backs include:
- Depreciation
- Business mileage
- Home office deductions
- Amortization
- Certain one-time expenses
These add-backs can significantly increase your qualifying income, even if your bottom-line taxable income looks lower than expected.
Consistency: The Homebuying Superpower
The biggest requirement for self-employed borrowers isn’t how much you make—it’s whether your income is stable and well-documented.
Lenders look for:
- Two-year history of self-employment
- Steady or upward-trending income
- Predictable business activity
- Clean, organized records
When the numbers make sense, approval is absolutely within reach.
How Affinity Home Lending Helps Self-Employed Buyers Win
Self-employed borrowers often worry they’ll be judged differently—but our job is to highlight your strength as a borrower, not just your deductions.
We help by:
- Reviewing tax returns early
- Identifying income add-backs
- Preparing lenders for fluctuations
- Structuring your file for maximum approval strength
Your business is your livelihood—and we know how to tell its financial story the right way.