How To Get Pre-Approved While Self-Employed

By Dana Monson

My team and I are expert real estate agents with Keller Williams in Marysville, WA and serve the greater Puget Sound area, providing home-buyers and sellers with professional, responsive, and attentive real estate services since 2004. Want an agent who'll really listen to what you want in a home? Need an agent who knows how to effectively market your home so it sells? Give us a call! We are eager to help and would love to talk to you.

For self-employed individuals, securing a mortgage can present unique challenges, especially when traditional income verification methods aren’t enough for loan pre-approval. Today, I spoke with Kirstin Ward from Movement Mortgage about the options available to self-employed borrowers who may struggle with the typical pre-approval process. Here’s what you need to know if you’re self-employed and looking to qualify for a mortgage:

1. Tax returns vs. bank statements. When it comes to self-employed borrowers, income verification can be tricky. Many self-employed clients work with CPAs to minimize tax liabilities, which often means reporting lower taxable income. Unfortunately, lower reported income can create hurdles when applying for traditional loans that rely on tax returns to prove earnings. In such cases, alternative methods like bank statement programs are available, where lenders analyze 12 months of business or personal bank statements to determine cash flow and calculate an income estimate.

2. Cash flow assessment via bank statements. Bank statement programs can provide flexibility for borrowers who cannot rely solely on tax returns. Lenders can review either business bank statements, using an expense factor to estimate income, or personal bank statements, assessing deposits made from business revenue to determine earnings. This option is particularly useful for self-employed professionals or independent contractors, who don’t receive W-2s but still maintain steady cash flow.

3. Working with a knowledgeable loan officer. Navigating these alternative options requires the support of an experienced loan officer who understands the complexities of self-employment income. Kirstin shared recent examples of clients who qualified using bank statement programs when tax returns alone weren’t enough. Choosing a loan officer familiar with these products can make a big difference in successfully securing a mortgage for self-employed individuals, including those with varying business structures, like LLCs or S-Corps.

For self-employed borrowers interested in exploring these options, consulting with a knowledgeable loan officer is a crucial first step. If you’re self-employed and considering a home purchase, call or email us to find the right approach for your unique financial situation!