Loan Options for Self-Employed Borrowers

Loan Options For
Self-Employed

As a business owner, who does not have W-2s and 1040s to support my income, what type of home finance options are available to me?

If you’re a business owner or self-employed borrower who doesn’t have traditional income documentation like W-2s or standard 1040 tax returns, you still have several home-financing options. Lenders now offer multiple programs designed specifically for entrepreneurs, gig-workers, and self-employed individuals with irregular or non-traditional income.

Below are the main types of financing available:

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1. Bank Statement Loans (Most Common)

What they use instead of W-2s/1040s:

✓ 12–24 months of personal or business bank statements

✓ Business P&L (sometimes)

How it works:

Lenders average your monthly deposits to calculate qualifying income. This is great for business owners who write off deductions on tax returns and show lower taxable income.

Pros:

• No tax returns required
• Higher qualifying income (because they use gross deposits)
• Flexible for many business types

Cons:

• Higher rates than conventional loans
• Larger down payment often required (10–20%)

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2. Profit & Loss (P&L) Only Loans

Documents required:

✓ CPA-prepared or accountant-prepared P&L for the most recent year

When used:

If bank statements fluctuate or don’t reflect actual profitability.

Pros:

• Fastest approval (minimal docs)
• No tax returns or bank statements needed

Cons:

• CPA verification required
• Not all lenders offer it

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3. Asset-Based (Asset Depletion) Loans

Qualification is based on:

✓ Your liquid assets (bank accounts, investments, cash reserves)

How it works:

Lenders treat your assets as income by dividing them over a set term (typically 84 or 360 months).

Best for:

People with significant savings/investments but low reportable income.

Pros:

• No income documents required
• Works for retirees or asset-rich business owners

Cons:

• High asset requirements

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4. DSCR Loans (Debt-Service Coverage Ratio) – For Investment Properties

Used for:

Buying or refinancing rental properties.

Qualification is based on:

✓ Rental income of the property — not your personal income.

Pros:

• No personal income documents required
• Great for real estate investors
• Quick approvals

Cons:

• Only for investment properties, not primary residences

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5. Non-QM Loans (Non-Qualified Mortgages)

An umbrella category that includes bank-statement loans, P&L loans, DSCR loans, and other flexible options.

Pros:

• Flexible guidelines
• Designed for self-employed borrowers
• Can finance primary, second, or investment properties

Cons:

• Higher interest rates than conventional
• Often require larger down payments

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6. Conventional Loans (Possible but Less Common)

If you do file taxes but just can’t use W-2s, you can still qualify using your Schedule C, K-1, or business returns, even if your income fluctuates.

But since you mentioned you don’t have 1040s, this will likely not be your route.

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What Lenders Typically Ask For (Depending on Program)

• 12–24 months of business/personal bank statements
• Proof of business ownership
• CPA letter (sometimes)
• Credit score (typically 620–660+ for non-QM)
• Down payment (10–20%)

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Which option is right for you?

It depends on how you prefer to document income:

If you’d like, I can help you determine which option fits you best.

Just tell me:

• Whether you’re buying or refinancing
• Approx credit score
• Approx annual deposits or assets
• Whether the property is primary, second home, or investment

I can give you a tailored recommendation and typical qualifying numbers.