Self-employed financing
For business owners, contractors, and freelancers whose income picture is more nuanced than a single W-2.
What it is
A family of documentation methods that let self-employed borrowers demonstrate income in different ways. The right method depends on your business structure, how you're taxed, and which documents represent your cash flow most fairly.
The common methods
Full-documentation analysis uses personal (and often business) tax returns. Bank-statement programs estimate income from deposits when write-offs lower taxable income. Some programs consider a profit-and-loss statement, and a few work directly from 1099s. Each treats deductions differently, so the same borrower can qualify differently under different methods.
When it may fit
If large legitimate deductions lower your taxable income, if your income varies year to year, or if you're recently self-employed, an alternative-documentation method may represent your situation better than a conventional full-doc read — or a conventional read may still be best. It's worth checking both.
Questions to ask a professional
- Which documentation method fits me, and how would each estimate my income?
- How are my business write-offs treated in the calculation?
- How much history do you require, and personal or business bank statements?
What it does not mean
Exploring documentation methods is not the same as calculating qualifying income or getting approved. Detailed income analysis and the final decision happen elsewhere.