How do lenders count income if you're self-employed?

By Justin Lazzaro, NMLS #1229453
Published October 9, 2026. Last reviewed October 9, 2026.

For a conventional loan, a lender usually starts with your last two years of tax returns, not your total sales. It looks at what your business earned after expenses, then adds back certain write-offs that weren't cash you spent. If your returns still show less than you need, a bank statement loan may be another option, if you qualify.

Who counts as self-employed?

Anyone who owns 25% or more of a business. That is the line Fannie Mae draws in its guidelines for conventional loans, so it includes owners who pay themselves a salary through the business.

How much history do I need?

Usually two years. Fannie Mae generally asks lenders for a two-year history of your earnings to show the income is likely to continue. Under its guidelines, less than two years may still work if your most recent tax returns show a full 12 months of income from the current business, and you earned the same or more before in the same line of work or a similar role.

What paperwork will I need?

Your signed federal tax returns for the last two years, with every schedule. Some owners also need their business tax returns, and a lender can use IRS transcripts in place of the returns. Under Fannie Mae's guidelines, if your business has been open at least five years and you've owned 25% or more of it that whole time, one year of returns can be enough.

Do write-offs lower my qualifying income?

Many do. A lender works from the profit left after expenses, so deductions that lower your taxes usually lower the income a lender can count. Some write-offs aren't money you spent that year, though. If you file a Schedule C as a sole proprietor, Fannie Mae has the lender add back depreciation, depletion, business use of your home, amortization and casualty losses. One-time income that won't repeat gets taken out.

What if my tax returns don't show enough?

A bank statement loan may be an option. Instead of tax returns, it uses 12 or 24 months of bank deposits to estimate your income. These are specialty loans, not standard Fannie Mae loans, so each lender sets its own rules. On business accounts, many lenders count only half of your deposits as income unless a tax professional documents lower expenses. Most want about two years in business, and these loans usually cost more than a conventional loan.

Who this doesn't cover

This article covers conventional loans that follow Fannie Mae's guidelines, plus bank statement loans. FHA, VA, USDA and Freddie Mac loans have their own self-employment rules, and lenders can add requirements of their own.

Your next step

If you own a business, it helps to see how your income looks on paper before you start shopping. Request a quote, or read how bank statement loans work.

Sources

This article is for general information only. It is not an offer to lend or a commitment to lend. Loan programs and guidelines change, and approval depends on credit, income, assets, property and program eligibility. Not all borrowers qualify. Market information is as of the date shown and comes from the sources credited. Any average rate mentioned is a national survey figure from its named source, not a rate offered by Reasy Financial, LLC or Justin Lazzaro. Justin Lazzaro, NMLS #1229453. Reasy Financial, LLC, NMLS #2446155, AZ BK 2012302. Equal Housing Opportunity.