A business owner's income rarely fits in one box.
Qualify on your deposits
Lenders review 12 or 24 months of business or personal bank statements to estimate your income, instead of relying on tax returns.
Ask about bank statement loans
Why tax returns can work against you
Smart business owners write off expenses to lower their taxes. The downside is that traditional mortgages use that lower taxable income to decide how much you can borrow. You might run a profitable business and still look like you can't afford the home you want.
How bank statement loans work
Instead of tax returns, the lender reviews your bank deposits over 12 or 24 months and applies an expense factor to estimate your income. It's a better match for how many business owners actually earn. These loans usually cost more than conventional financing, so it's worth checking whether you qualify both ways.
Other ways to document income
Depending on your situation, a CPA prepared profit and loss statement, 1099 forms, or even your assets may be used to qualify. Investors buying rentals can also look at DSCR loans, which focus on the property's rent instead of personal income.
Rentals on your return?
The same tradeoff applies to rental write offs. See Schedule E explained.
Prepare before you apply
Keep business and personal accounts separate. Avoid large deposits you can't explain. Talk to your CPA about timing if you're planning a purchase in the next year or two. A little planning keeps the paperwork from deciding what you can buy.
Self employed financing guides
How each program counts your income, and how to choose between them.