For some mortgage borrowers, providing a monthly income calculation is not as black and white as it is for others. Those who perform freelance work, own a business, or independently contract out their work are considered as part of the “self-employed” set of borrowers to mortgage lenders.

Though proving a solid income may be more difficult it doesn’t mean that the self-employed cannot obtain a mortgage loan. They just need to use other methods and other loan products as compared to traditional conventional means to get approved.

You Might Be Considered as Self-Employed in the Mortgage World If You…Types of Borrowers Categorized as Self-Employed

Are the Sole Proprieter of a Business

Own Your Own Business

Receive Royalties for Creative Work

You Receive Most of Your Income from Landlord Duties

You Pay Self-Employment Taxes

25% or More of Your Income is from Commission or Bonus Income

You Work Through a Contract (Gig Work) Even if You Only Perform Work for One Company

You Obtain a 1099 Form for Taxes Instead of a W2

Most of Your Income is Through Dividends and/or Interest

You are a Business Partner that Obtains 25% or More Ownership in a Business

Business Structures Considered As Self-Employed

There are a wide variety of business structures here in America and many of them are considered under the description of ‘self-employment” as far as mortgage lending is concerned. Underwriters give each type of self-employment business structure a different type of oversight when it comes to lending out money.

The most common business structures considered to be under the self-employment category include:

S Corporations

A company/corporation with a limited number of stockholders. Owners of this type of corporation will be asked to supply an N1120S tax return as proof of income to a lender


The business is owned by stockholders and these are usually large companies. If a borrower has 25% or more ownership this is considered self-employed. Getting tax returns for a corporation can be difficult because it could mean many parties being involved in their official release.


This is a business term used to describe two or more people that own a business together. Profits from this business or split between all of the owners.

Sole proprietorship

This means there is one person in control of the business and is the one and only owner. The income for the business is reported on Schedule C of a personal income tax return. Most often these represent small businesses.

Types of loans available to the self-employed

All self-employed borrowers have the option to go with traditional loans as well as other types of loans that might be more easily obtainable due to the nature of documenting their income.

Conventional loans are still available to those who are self-employed but in some areas where a self-employed individual may have more trouble qualifying for a mortgage loan non-QM mortgages offer a wider set of qualifying parameters to more easily obtain a mortgage loan to purchase a property.

A non-QM mortgage is simply a mortgage that does not use the standards set by federal loan backing giants Fannie Mae and Freddie Mac. These loans are originated by lenders within their own specific qualifying parameters with a focus on helping borrowers that do not fit within the conventional box to obtain a loan.

For more information on non-QM mortgages in Mission Viejo and California please contact me anytime.

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Additional Tips for the Self-Employed