Self-Employed & Bank-Statement Financing

Business owners, freelancers, 1099 contractors, and gig workers. Lenders generally look for a stable history of self-employment and a business that’s likely to continue.

• Full documentation (agency): Fannie Mae generally uses two years of signed personal (and sometimes business) federal tax returns. It allows less than two years of self-employment in some cases, if the most recent returns show a full year of income from the current business and prior work was in a similar field (B3-3.2-01).
• Bank-statement programs (non-QM): typically use 12 or 24 months of personal or business bank statements, then apply an expense factor or use a profit-and-loss statement to estimate qualifying income. Exact methods vary by lender and investor.
• Whatever the documentation, federal rules require lenders to make a reasonable, good-faith determination that you can repay, using reliable third-party records. Financial-institution records are one accepted type (Regulation Z §1026.43).

Agency full-documentation loans follow the standard minimums for conventional, FHA, VA, or USDA.

Bank-statement programs generally require more down than agency loans, and the requirement often rises as credit scores fall or loan amounts grow. There’s no single standard; it depends on the lender and investor.

What “non-QM” means: a qualified mortgage (QM) meets specific CFPB product and underwriting standards. A non-QM loan doesn’t, but the lender must still satisfy the ability-to-repay rule (CFPB ATR/QM).

Expect lenders to review credit history, reserves (months of payments in savings), how long you’ve been self-employed, and consistency of deposits. Large one-time deposits may need explanation.

If you’re planning a purchase in the next year or two, talk with your tax preparer and Shane together: deductions that lower taxes can also lower qualifying income for agency loans.

Agency loans carry the usual mortgage insurance or fees for their loan type.

Bank-statement programs often don’t require mortgage insurance, but their pricing usually reflects the added risk. Some include prepayment penalties where the law allows. Compare the Loan Estimate’s total costs (CFPB).

1. Would I qualify for an agency loan with my tax returns? What would that look like?
2. How would a bank-statement program calculate my income, and over how many months?
3. What down payment, reserves, and credit score would be required?
4. Is there a prepayment penalty or an adjustable rate?
5. What would change if I waited until my next tax return is filed?