How Lenders Calculate Your Income When Self Employed

If you’re self-employed, your tax returns are everything. 

Not your gross revenue.

Not your bank deposits.

Not what you “made last year.”

We qualify you based on net income, so your income after deductions.

What Underwriters Focus On

• Two years of filed tax returns
• Consistency or growth in income
• Business stability
• Write-offs and add-backs
• Debt obligations

Depreciation and certain non-cash expenses can often be added back in but aggressive write-offs?

They reduce qualifying income.

Why Revenue Doesn’t Equal Qualifying Income

If you gross $150,000 but write off $90,000 in expenses, your usable income may only reflect the remaining amount. If you think about it, that's the amount left over to pay other bills, such as that new mortgage.

How to Prepare Before Applying

• Don’t over-deduct the year before buying
• Keep clean books
• File taxes on time
• Avoid dramatic year-over-year drops

If you're planning ahead, we can review your returns before you file and talk strategy.

Bottom Line 

Self-employed buyers can absolutely qualify. If a traditional loan doesn't work, we can always talk about non traditional loan types like bank statement loans or DSCR loans. More on that later.