Yes, you can get a mortgage while you’re self-employed.
But lenders qualify you on your net income after write-offs, averaged over two years, not on your gross revenue. Every deduction that shrinks your tax bill shrinks your buying power, too. The fix: set aside 25 cents of every dollar for taxes so you’re never tempted to over-deduct.
Since 1994, I’ve sat across from hundreds of self-employed business owners who wanted a home, only to watch the deal fall apart when their tax returns hit my desk. It’s almost always the same two problems. First, the borrower never set money aside for taxes. Then comes the surprise (“I owe HOW much? Please fix that!”), and the CPA or tax preparer gets overly generous with deductions. Both quietly wreck your borrowing power.
No one likes paying the government. (Trust me, I write that check too.) But taxes are the price of making money, and how you handle that bill decides whether you can buy the house you’re working for. The answer isn’t more deductions. It’s a simple 25-cent rule.
Why is a big tax bill good news when you’re buying a home?
I treat a big tax bill like a victory lap. It proves you made money. When you’re self-employed, you’re paying more than income tax. In 2026, self-employment tax adds 12.4% for Social Security on net earnings up to $184,500, plus 2.9% for Medicare on all of it. Employees split that with their boss. You carry the whole thing.
You’re in a higher bracket because you’re succeeding. The only question is whether you planned for the bill.
Wait. A big tax bill is GOOD news?
How much should you set aside for taxes if you’re self-employed?
At least 25 cents of every dollar of profit is a great starting point. Put it in a separate account before you spend a dime. Net $100,000? Park $25,000. Minimum. For a Texas earner at that level (no state income tax), that usually covers federal income tax and self-employment tax. Higher earners need more, so let your CPA set your real number.
Why a number instead of “save what you can”? Because a number is a boundary. It keeps you out of the two traps I see every week: you can’t pay the bill, or you shrink the numbers so you don’t have to.
How do write-offs hurt getting a mortgage while self-employed?
Here’s the trap. April rolls around and it’s time to file. You hand your tax preparer all your numbers and documents, they run a draft, and then comes the surprise: you owe a LOT of money.
Worse, you didn’t set enough aside to cover it.
So now you need to shrink the bill. You claim every deduction you can find, and the return that comes out the other end shows a lot less income than you actually made. And once you file it, that’s the return a lender has to use.
Lenders don’t qualify you on gross revenue. They generally average two years of net income after deductions. So a self-employed borrower grossing $200,000 but showing $90,000 after deductions can buy less house than a salaried borrower making $100,000.
The good news? Both problems are fixable. Save first, so you never have to scramble. Scrambling is what leads to overly generous deductions or, worse, owing the IRS at the end of the year and setting up a payment plan (also known as a debt, and lenders count it). And if your returns already tell the wrong story, there’s another door.
Underwriters read the fine print. Every line of it.
Which write-offs do lenders add back?
Underwriters know which write-offs are paper and which are real. (I used to be one.) Here’s a simple rule of thumb: if you wrote a check for it, it’s real. If you didn’t, an underwriter will usually add it back to your income.
Depreciation, depletion and amortization are the big ones. No cash left your account, so they come back. (One bonus that works in your favor: on conventional loans, the home office deduction gets added back too.) Marketing, supplies, subscriptions? You wrote the check. That’s real cash, and no lender brings it back.
And meals? Think twice. I mean it. Say you spent $4,000 on business meals. The IRS only lets you deduct half, so your return shows $2,000. But lenders run a real cash flow analysis, and they know you actually wrote checks for $4,000. So they subtract the other $2,000 too. That’s every loan program, not just one.
What if your self-employed income went down?
Watch out here. If your taxable income dropped from one year to the next, pretty much every loan program will use the lower, more recent year instead of the two-year average. And on an FHA loan, a drop of more than 20% also turns your file into a manual underwrite. Squeeze one year’s return to dodge taxes, and you may lock in a low number right when you need a high one. Sonofabiscuit.
Can you get a mortgage while self-employed without using tax returns?
Yes. Non-QM loans, like bank statement loans and P&L loans, look at what your business actually brings in instead of what your tax return says. This is the “second door” I mentioned above.
A bank statement loan calculates your income from 12 or 24 months of business or personal bank deposits. A P&L loan uses a profit and loss statement, usually prepared or verified by your CPA or tax preparer. Either way, your write-offs don’t drag your qualifying income down the same way.
The tradeoff? These loans usually cost more and need a bigger down payment than conventional, FHA or VA loans. Think of one as a bridge, not a forever plan. Once your tax returns tell the right story, refinancing into a traditional loan may be an option.
When should you talk to a lender (me!) if you’re self-employed?
Twelve to eighteen months before you want to buy. Not after you’re already under contract. How you pay yourself, when you buy equipment, what you deduct: once a return is filed, it’s baked into two years of averaging. I can help you build a homebuying plan that actually works.
My honest advice: pay your taxes, keep your deductions honest, and set aside 25 cents of every dollar. A fat tax bill is the receipt for a successful business. Let it get you the house, not keep you out of one. But that only works if the money’s already sitting there when the bill comes.
I’m a loan officer, not a CPA, so bring your tax pro in on this. But if you’re self-employed and thinking about buying a home in Austin, grab 15 minutes on my calendar before you file next year’s return. Ready to go? Start your application here.
Cheers!
Mark
Last updated: October 2026
FAQ: Getting a Mortgage when you’re self-employed
Usually two years of personal and business returns. On conventional loans, one year may be enough. Freddie Mac can allow it if you’ve been self-employed in the same business for at least five years, and Fannie Mae can allow it when its automated underwriting system permits it. FHA generally wants two years, with limited exceptions when you have prior experience in the same line of work.
Yes. Depreciation is a paper expense, so lenders add it back to your qualifying income. Depletion, amortization and business use of your home get the same treatment. Routine cash expenses like supplies and marketing, insurance, legal expenses don’t. They stay deducted and lower the income a lender can use. Think of it like this: If you write a check for it, it’s a real expense.
Start with 25 cents of every dollar of profit, kept in a separate account. Texas has no state income tax, so at moderate income levels that usually covers federal income tax and self-employment tax. Higher earners need more. Your CPA should set your actual percentage and your quarterly estimated payments.
Mark Smith, Senior Loan Officer | NMLS #295910 | Gardner Financial Services, LTD., dba Legacy Mutual Mortgage | NMLS #216557 | Equal Housing Lender