Skip to main content
Self-employed borrowers face a specific problem with traditional mortgages: tax returns understate income. Business owners who write off legitimate expenses, contractors who deduct equipment and mileage, and professionals who reinvest profits all show lower taxable income than what they actually earn. Traditional lenders qualify borrowers based on taxable income. This gap between real earnings and reported income is why self-employed borrowers are often told they don’t qualify—even when they’re financially strong.

​
How These Loans Fill the Gap

These specialty mortgage programs use alternative methods to document and calculate income. Rather than relying on tax returns, they look at bank deposits, 1099 earnings, accountant-prepared financial statements, or liquid assets. The four primary loan types for self-employed borrowers are: Bank Statement Loans — Income is calculated from 12 or 24 months of bank deposits. Best for business owners and self-employed borrowers with consistent cash flow through their accounts. 1099 Loans — Income is calculated from 1099 forms rather than tax returns. Best for independent contractors who receive 1099s and have stable client relationships. P&L Loans — Income is documented through a CPA-prepared profit and loss statement. Best for borrowers whose P&L reflects higher income than their tax return or bank statements. Asset Depletion Loans — Income is calculated by dividing liquid assets over a set period. Best for borrowers with substantial savings or investments but limited documentable income.

​
What These Loans Have in Common

All four are offered by specialty lenders rather than conventional or government-backed programs. Common characteristics:
  • Higher interest rates than conventional mortgages (typically 0.5-2% above)
  • Larger down payment requirements (10-25% minimum)
  • Higher minimum credit scores (620-700+)
  • No PMI (private mortgage insurance) in most cases
  • Loan amounts up to $5 million or more

​
Choosing the Right Program

The right loan type depends on how your income is structured and what documentation you can provide most effectively. Some borrowers qualify under multiple programs—in those cases, running numbers across approaches and choosing the one that yields the highest qualifying income is standard practice. Not all specialty lenders offer all four programs. Shopping multiple lenders is more important with these loans than with conventional mortgages, because program terms vary significantly.