Self-Employed Mortgages in St. Louis
It doesn’t have to be complicated. Your income just has to be calculated correctly, by someone who does it every day.
Sean Zalmanoff · Founder and Chief Loan Officer · NMLS #239823 · Verify licensing
One of the biggest misconceptions in this business is that getting a mortgage when you’re self-employed is hard.
I hear it constantly. My lender said my income is too complicated. They told me they can’t use all of it. I own a business, so I assumed this would be difficult.
A self-employed mortgage isn’t necessarily harder than a mortgage for someone with a W-2. We just have to calculate the income differently. That’s the whole difference. And it’s the part experience actually matters for.
Self-Employed Mortgages Checklist: What to gather before we talk
Not every item applies to every business owner. That part is our job to sort out. But this is where most self-employed files start.
Almost always
- Personal federal tax returns for the last two years, with all schedules and attachments (not just the first two pages)
- A year-to-date profit and loss statement for the business
If you receive them
- K-1s from any partnership or S corporation
- W-2s and recent pay stubs, if you pay yourself a salary through your own company
- 1099s, if you’re paid as a contractor
If you own a share of a business
- Business federal tax returns: Form 1065 for a partnership, 1120-S for an S corporation, 1120 for a C corporation. Whether we need these depends on how much of the business you own, and we will confirm that early.
- A Schedule C comes with your personal return if you’re a sole proprietor
If your write-offs make your income look low
- 12 or 24 months of business bank statements: the starting point for a bank statement loan, where deposits and cash flow matter more than taxable income
Don’t wait until you have all of it. Tell us how you make your money and how the businesses are structured, and we will tell you exactly which of these apply to you.
The real difference is how your income gets calculated
If you’re a W-2 employee with a salary or guaranteed hours, qualifying income is relatively simple. Once employment and compensation are documented, we can generally use it.
When you’re self-employed, we look at the history of the income and how the business has actually performed. That usually means reviewing one or two years of tax returns, depending on how long you have owned the business and which program we’re using.
And this is the part most people miss. we’re not just reading the number on the front page of your return. Depreciation, amortization and other allowable adjustments can often be added back when we calculate qualifying income. We look at the business, your ownership percentage, your actual cash flow, and whether that income can reasonably be expected to continue.
That’s why two lenders can read identical tax returns and reach completely different answers.
One year of returns, or two?
Most self-employed borrowers should expect us to review up to two years of income history. There are exceptions.
Certain conventional guidelines allow us to use only the most recent year when the business has been operating for at least five years and you have held the required ownership through that period. Documentation can also differ depending on how the business is structured and how you pay yourself.
This is exactly why I would rather talk to you before you start making decisions based on what you assume a lender will require.
What documents will you actually need?
There’s no single list that applies to every business owner. It depends on how you earn and how the business is set up. You might have:
- Personal tax returns with a Schedule C
- A W-2 from your own company
- K-1 income from a partnership or S corporation
- Income from several companies at once
- Some combination of W-2 wages, distributions and business income
For conventional financing, owning a significant share of a business generally makes you self-employed for underwriting purposes, and we may need the business return alongside your personal one. The point isn’t that you need all of this. The point is that figuring out which pieces apply to you is my job, not yours.
What if your write-offs make your income look too low?
This is the most common problem business owners run into, and it’s worth being direct about it.
Your accountant’s job is to legitimately minimize your taxable income. My job is to determine how much income we can use to qualify you. Those are two different calculations with two different goals, and they frequently pull in opposite directions.
Sometimes the tax-return method works fine. Sometimes it doesn’t, and that doesn’t mean you can’t qualify. We also have access to bank statement loans, which can qualify a self-employed borrower based more on the deposits and cash flow of the business than on taxable income. Those programs have their own requirements, and the calculation is more involved than adding up deposits. But for the right borrower they’re an excellent option.
Start from the payment, not the tax return
Most calculators ask for your income first. That is usually the one number a self-employed borrower can’t answer yet. This one works backwards. Tell it what you’re comfortable paying each month and it estimates the price range that fits.
Budget to priceWhat home price fits my monthly payment?
A lender can tell you the most you might borrow. This starts with what you actually want to pay each month, then works backward to a price range — taxes, insurance and mortgage insurance included.
Then let us work out the income side. That’s the part we do every day.
Just made partner at a firm? Congrats! But read this one.
This is my favorite example of why experience with self-employed income matters, and it catches people constantly.
Attorneys, physicians, architects, engineers and accountants are often employees of a firm and then offered partnership. They go from a W-2 to partnership income and guaranteed payments. On paper it suddenly looks like they became self-employed.
In reality almost nothing changed. Same firm, same job, usually more money. The ownership interest is often small and designed mainly to keep them there.
Guidelines recognize this. When the ownership is nominal, you have an established history with the firm, and the new compensation is documented properly, we may be able to use that income without waiting for two years of self-employment history. That’s the difference between talking to a lender who knows the guideline and one who tells you to come back in two years.
What if you own more than one business?
That’s fine. We work with borrowers who have several companies and several income streams: a paycheck from one, K-1 income from another, Schedule C income from a third. We analyze each source on its own and then determine what can be combined for qualifying.
It looks complicated spread across your kitchen table. It looks a lot less complicated to a team that does this every day.
The earlier we talk, the more options you have
This is the most useful advice I can give a self-employed borrower: call before you need to.
If you’re thinking about buying in six months, call now. If you’re about to file your return, call. If your accountant is considering a change to how you pay yourself, call. If you’re about to become a partner, or restructure the business, call.
A conversation before a return is filed or a structure changes can give us meaningfully more room later. I would much rather help you plan for the mortgage than try to unwind something afterward.
Self-employed doesn’t mean difficult
I have been analyzing self-employed borrowers for more than two decades, and the fundamentals aren’t mysterious. There may be more documents. The calculation has more moving parts. But it’s a process, and our team has spent decades on tax returns, K-1s, partnerships, corporations and borrowers with income arriving from several directions at once.
So if another lender has told you that being self-employed makes this hard, I wouldn’t assume your situation is the problem. It may just mean you need a lender who understands self-employed income.
Let’s figure out what your income actually qualifies for
You don’t need to work out which returns, schedules, K-1s or business documents we need before you call. That’s my job. Tell me how you make your money, how the businesses are structured, and what you’re trying to do. We will handle the rest.
Self-employed mortgage FAQs
Educational information only, not a commitment to lend, a rate quote or an approval. Loan approval is subject to full underwriting review. Better Rate Mortgage · NMLS #2401335 · Equal Housing Lender.
