You’re the boss.
As a self-employed worker, you call your own shots, set your own hours, and enjoy autonomy all year long.
There’s only one problem: Getting a mortgage seems impossible.
Seriously—when was the last time you saw an ad with the phrase mortgage for the self employed?
Those words are never united because traditional lenders don’t think outside the box. That’s why they ask for the hallmarks of the wage-earning majority (like W-2s).
That’s not your financial situation, and that’s okay. There’s a much easier way for self-employed individuals to buy a home.
Unfortunately, most people haven’t heard about it—and that’s what we’re here to discuss.
Call it the 1099 mortgage, the variable income mortgage, or whatever you like. At Quontic, we simply call it the mortgage you deserve.
Whether you’re an entrepreneur, small business owner, or gig-worker, we’ll show you how to buy the home of your dreams.
Who Are Self-Employed Borrowers?
If you’re self-employed, you can get a mortgage.
The only question is…are you considered a self-employed borrower?
Here’s the simple answer: If you manage your own taxes, and report income through business revenue or a 1099-NEC, then yes, you’re self-employed.
Even if you work part-time for a W-2 employer, you’re still considered self-employed if you make money through your small business or gig-work. That’s why the Internal Revenue Service (IRS) requires you to report earnings if you earn over $400 from self-employment opportunities.
What about freelancers and contractors?
Any earnings from project-based and “independent” work is also considered a form of self-employment.
However, there’s a catch: While all freelancers are self-employed, not all self-employed people are freelancers. After all, many self-employed workers run businesses with a formal structure (like an LLC).
Either way, you’re in good company.
Roughly 10% of the U.S. workforce is self-employed, and nearly 64 million Americans do some form of freelance work each year. That’s over 38% of the total workforce delivering $1.3 trillion in annual earnings to the GDP.
Despite their economic power, self-employed people don’t have it easy in the housing market.
Challenges of Self-Employed Mortgage Applications
As a self-employed professional, you’ve learned to embrace uncertainty.
Your patience isn’t shared by everyone, and certainly not by traditional lenders.
Lenders are risk-averse by nature. After all, their primary focus is to protect their financial interests and limit their overall exposure.
To do so, they implement strict lending guidelines with no room for compromise. That’s business.
Unfortunately, that’s also why most self-employed applicants struggle to obtain a home loan from traditional lenders.
The challenges start with the paperwork. In fact, irregular income is the main reason self-employed mortgages get denied.
When lenders review a candidate, they look at two items: Recurring pay stubs and/or W-2s. Cash flow is king.
If you’re self-employed, however, consistent pay stubs and W-2s aren’t an option.
When lenders review your financials, they see fluctuation. Though impressed by one month’s impressive earnings, they’re spooked by a down season, and they miss the big picture along the way.
This has nothing to do with you and everything to do with their operating procedures.
Nevertheless, irregular income will put pressure on your documentation requirements.
Documentation Requirements for Self-Employed Borrowers
In lieu of pay stubs, lenders will shift their attention to your tax returns.
They will start by requesting two years of federal personal tax returns (Form 1040).
If you own 25% or more of a business, you will need to include two years of business tax returns (i.e. Form 1120 for corporations and Form 1065 for partnerships).
Next, lenders will request any part-time W-2s, 1099s, and other earned income from the same period. On the entrepreneurial front, they will want to confirm your business license, partnership agreement, and DBA (Doing Business As) certificate.
In addition to tax documents, lenders will request personal bank statements for the past two to three months and business bank statements for the past two years.
This can be a major hurdle for emerging business owners, unless you are transitioning from a salaried position in the same industry.
But wait, there’s more…
Next, lenders will want to view a current balance sheet detailing your assets and liabilities. This document will be used to calculate your personal and business debt-to-income ratio (DTI), which determines what percentage of your pre-tax monthly income goes towards monthly debt payments.
As a general rule, most lenders set a maximum DTI of 35%.
What about contractors and freelancers?
If you’re in this group, be ready to confirm your cash flow by showing client contracts and invoices. To that end, it’s also advisable to have proof of liquid assets on hand, like your savings and investment accounts.
Finally, whether you’re a business owner or gig-worker, you will need a letter from your accountant or tax professional that corroborates your self-employment status. This document should confirm that you have filed taxes as a self-employed individual for at least two years.
Though this might seem redundant, lenders will appreciate your verification.
Note: All applicants will be subject to a credit check. While personal credit reports will be pulled via TransUnion, Experian, and Equifax, business credit reports will be accessed through Dun & Bradstreet (D&B), Experian Commercial, and Equifax Small Business.
Loan Solutions for Self-Employed Homebuyers
Ready for the good news?
The documentation requirements above are the domain of traditional lenders, who craft their mortgage criteria around wage-earners (not self-employed workers).
Not all lenders maintain such narrow codes.
In fact, some will gladly break tradition to give qualifying candidates access to loans—even if their profiles don’t fit neatly into a standardized box.
By leveraging alternative income documentation, such lenders can provide a clear path to homeownership for the self-employed.
1. Alternative Income Verification Methods
No W-2s? No problem.
Some lenders will accept a 12 Month CPA / Tax-Prepared Profit & Loss Statement (P&L) as proof of income. This document unlocks a comprehensive view of your financial profile that W-2s simply can’t match.
Beyond a third-party-certified P&L, there are other options to consider.
For example, some lenders will accept bank statements to verify income. This can be ideal for entrepreneurs with strong liquidity but lower taxable income (due to business expenses).
Down years happen to everyone, and it shouldn’t disqualify you from homeownership.
Having your P&L and bank statements on hand can help you tell your story on your terms.
2. Flexible Down Payment Options
As a self-employed borrower, you don’t have to cover the down payment by yourself.
In fact, some lenders will accept gift funds (i.e. money given to you with the express purpose of covering closing costs and making a down payment).
That’s great news if you’re self-employed, as alternative lenders will typically request a down payment starting at 20 percent.
It gets better.
While many traditional lenders limit gift funds to a percentage of the down payment, others allow self-employed applicants to use them for 100% of your down payment.
All you need is a signed letter from your donor stating the funds are a gift and not a loan.
3. Holistic Financial Assessment
Traditional lenders believe qualified candidates fit the same basic equation. Like 2 + 2 = 4.
Though alternative lenders agree on the math, they prefer to reach the same answer through different means.
Simply put, their paradigm is inclusive.
Alternative lenders know that self-employed borrowers are more than their paperwork. By embracing uniqueness, alternative lenders can take a holistic financial assessment of their applicants.
Nothing is off the table.
If you don’t have W-2s, they’ll accept a certified Profit & Loss statement.
If you don’t have viable tax returns, they’ll gladly review your bank statements.
If you don’t have adequate cash flow, they’ll welcome gift funds for your down payment.
2 + 2 = 4. But so does 1 + 3.
Tips To Improve Mortgage Eligibility
As a self-employed borrower, you have multiple routes to obtain a mortgage. Nevertheless, some lenders may offer greater resistance than others.
Preparedness is key. If you pursue traditional mortgages, it’s essential to maximize your eligibility before applying.
The following categories offer a quick checklist before you get started.
Maintain Consistent Income
If possible, aim for at least two years of steady self-employment income.
Whether you’re a business owner or gig worker, keep detailed records of earnings through bank statements, contracts, and invoices.
Reduce Your Debt-to-Income (DTI) Ratio
Do whatever you can to keep your DTI below 35%.
If you’re shopping on a longer time horizon, look for opportunities to pay down debts and increase cash flow.
Boost Your Credit Score
If you don’t have W-2s, lenders will place a greater premium on your credit score.
Aim for a minimum FICO® score of 660 (the higher, the better). If possible, avoid opening new credit lines before applying.
Limit Tax Deductions
Tempting though it may be, maxing out your business write-offs could actually hurt your chances of getting a mortgage.
After all, lenders will use your adjusted gross income (AGI) to determine how much you can borrow.
Build Cash Reserves
Keep your powder dry.
When it comes to self-employed borrowers, most lenders like to see at least six months of mortgage payments in your savings and investment accounts.
Prioritize a Big Down Payment
This might be the most vital component of all.
Aim to save at least 20% percent down payment. And know that anything over 30% will be a major win for you. After all, large down payments lower monthly costs and help you avoid private mortgage insurance (PMI).
These are the financial tenets of conventional mortgages.
If they seem complicated, that’s because they are. And that’s exactly what we’re here to fix.
Quontic: Simple Mortgages for Entrepreneurs
You’re the boss.
As a self-employed worker, you call your own shots. With Quontic on your team, you can get the mortgage you deserve (so you can focus on growing your business).
Our mission is to make self-employed mortgages a common expression, not a distant idea.
As a federally chartered digital bank and CDFI, we’re one of only a few lenders that can accept alternative income documentation.
So instead of tax returns and W-2s, we can help you get a mortgage with just one document: A 12 Month CPA / Tax Prepared P&L.
In addition to our flexible income documentation, there are other great routes to qualifying, like our Asset Utilization Loan, which takes a comprehensive view of your financial picture.
Whether you’re a contractor, entrepreneur, freelancer or gig worker, we can help you unlock your dream home. And we can do it on your terms.
The first step? Get pre-qualified (in 60 seconds or less).
Disclaimer:
All lending products are subject to credit and property approval. Rates, program terms, and conditions are subject to change without notice. Not all products are available in all states or for all amounts. Other restrictions and limitations apply. Information is accurate and effective as of May 19, 2025, and is subject to change without notice. Quontic Bank name and logo are registered trademarks. © 2025 Quontic Bank. All rights reserved.
