Anyone whose primary income comes from self-employment — sole proprietors, partners, S-corp owners, freelancers. Mortgage qualification is more document-heavy than for W-2 employees.
If you own 25% or more of a business, work as an independent contractor, or earn most of your income through a 1099 rather than a W-2, mortgage lenders treat you as a self-employed borrower. This isn't a barrier to getting a mortgage — it's just a different documentation path.
Standard requirements: two years of personal tax returns, two years of business returns (if you have a separate entity), a year-to-date profit and loss statement, recent bank statements showing business and personal deposits, and often a CPA letter or business license confirming continued operation.
The income that counts is your net income after deductions, averaged across the two years. Aggressive deductions help your tax bill but hurt your mortgage qualifying income — it's a real trade-off worth thinking about in the year before you buy.
Example
A freelance consultant nets $140K in 2024 and $160K in 2025 on Schedule C. Lender averages them: $150K. Plus they need a YTD P&L showing they're on pace, current bank statements, and a CPA letter. Doable, just more paperwork than a W-2 employee.
Also known as
1099 borrower, independent contractor borrower, sole proprietor borrower