If you’re self-employed and looking to buy your first home, the process comes with a few extra steps. Being your own boss has benefits, but when it comes to a mortgage, lenders want to see consistent, documented income. The key is planning ahead so you’re ready when the right house comes along.
I work with a lot of small business owners, gig workers, and entrepreneurs here in Arizona, and the same rules apply: the more you understand what lenders look for, the smoother the process will be.
Income Requirements for Self-Employed Buyers
The most important thing to know is this: You need two years of tax returns that show steady self-employment income. If you just started a business six months ago and it’s taking off, that’s great, but there’s no income history for us to use. Even with strong revenue, the numbers have to be documented and filed with the IRS.
Some specialty loan programs exist, like bank statement loans or profit-and-loss statement loans, but those are non-traditional and often come with higher rates. For most first-time buyers, sticking with a standard program means making sure you have two solid years of tax returns.
The Net Income Reality
Here’s where many self-employed buyers run into trouble. Let’s say your business brought in a million dollars last year. Sounds great, but if you wrote off $950,000 in expenses, your net income is $50,000. That’s the number a lender will use, not your gross revenue.
If your tax returns show negative income, qualifying for a home loan through standard programs isn’t going to happen. That’s why I often tell self-employed buyers to “bite the bullet” for a couple of years. Claim more income on your taxes, even if it means paying more in taxes upfront, so you’re in a stronger position to qualify for the mortgage you want.
What Lenders Are Looking For
When reviewing self-employed income, lenders want to see:
- At least two years of consistent self-employment history.
- Net income that supports the mortgage payment.
- Stability—no sharp declines in income from one year to the next.
- Filed tax returns that back up what you’re earning.
Without these, the options get limited and often more expensive. Planning ahead makes all the difference.
Why Patience Pays Off
For first-time self-employed buyers, it’s about playing the long game. Taking the right steps now ensures you’ll qualify for better loan programs later. If you want to avoid high-rate specialty products, use these two years to prepare: keep clean books, report as much income as possible, and avoid writing off everything under the sun.
I know it feels like a trade-off—less tax savings today in exchange for the ability to buy your home tomorrow. But once you own the home, you start building equity, and that wealth-building power is worth far more than a temporary tax break.
Setting Yourself Up for Success
The good news is, being self-employed doesn’t lock you out of homeownership. It just means you need to know the rules of the game. And the earlier you start planning, the faster you’ll get there.
Here’s what I tell self-employed first-time buyers: build a two-year history, keep your income strong, and file your taxes with your future mortgage in mind. Do that, and you’ll be ready when the right house shows up.
Owning a home is one of the best investments you can make in your future. Don’t let self-employment hold you back; let it push you to plan smarter.
If you’re ready to discuss your home loan options, I’m ready to help guide you through the details.
– REHL Team Clemente at: clemente@ramonespinozahomeloans.com or Ramon at ramon@ramonespinozahomeloans.com.
Se habla Español
