How do I get a mortgage with self-employment income?

Self-employed borrowers face additional scrutiny because their income is considered less stable than salaried employees. Lenders want to see a history of consistent or growing income. You will need to provide two years of complete federal tax returns, including all schedules, a year-to-date profit and loss statement, and two years of business bank statements. If your business is structured as an S corporation or LLC, you may also need corporate tax returns and K-1 forms. The lender uses your adjusted gross income from your tax returns, not your gross business revenue. This means your business deductions reduce your qualifying income. If you write off significant expenses, your qualifying income may be much lower than your actual cash flow. Strategies to maximize your qualifying income include working with a lender who uses a more flexible underwriting approach like bank statement loans, minimizing business deductions in the year before you apply, maintaining strong cash reserves, and having a larger down payment. Some lenders offer alternative documentation programs for self-employed borrowers that use bank deposits instead of tax returns, though these typically have higher rates and fees.