Qualifying monthly income
$0
2025 income$0
2024 income$0
Trend-
Compare the two ways to qualify
Tax returns$0per month, for regular loans (Conventional, FHA, VA)
Bank statements$0per month, for bank statement loans
See how much house this income can buy →
Estimate only. Real underwriting also looks at year-to-date profit and loss, one-time income, business stability and cash flow. Sarah reviews your actual returns before you rely on a number.
Want to talk it through? Contact Sarah
How lenders calculate self-employed income
For regular loans, lenders use your last two years of tax returns. They start with the profit on your return, add back expenses that lowered your taxes without costing you cash, like depreciation and the business use of your home, and subtract a few things that cost cash but were not deducted. If your income held steady or grew, they usually average the two years. If it went down, they usually use the lower, more recent year, and a big drop needs an explanation.
Many self-employed buyers are surprised that their qualifying income is far lower than what their business actually brings in. Write-offs that save taxes also shrink the income a lender can count. In Sarah's experience reviewing files, a common problem is simply that the income was calculated incorrectly, for example by missing add-backs. Read the case studies →
Self-employed income questions
How do lenders calculate self-employed income for a mortgage?
They use your last two years of personal and, if needed, business tax returns. They start with net profit, add back non-cash expenses such as depreciation, depletion, amortization and business use of your home, subtract items like non-deductible meals, and then average the two years when income is stable or rising. If income declined, they usually use the lower recent year.
Why is my qualifying income lower than what my business makes?
Lenders count the income on your tax returns, after business expenses and write-offs. Deductions that lower your taxes also lower the income a lender can use. Some add-backs help, but many real business expenses are not added back, so qualifying income is often well below gross revenue.
What if my income went down last year?
Most lenders will use the lower, most recent year instead of the two-year average, and they may ask for a written explanation and a year-to-date profit and loss statement. If the drop is large or continuing, the income may not be usable at all until it stabilizes. Sarah can review whether the decline was a one-time event.
Can I use bank statements instead of tax returns?
Yes, with a bank statement loan, a type of non-QM loan. The lender averages 12 or 24 months of deposits and, for business accounts, applies an expense ratio, often 50%. These loans can help when write-offs make taxable income look low, but they usually require a larger down payment and carry a higher rate than conventional, FHA or VA loans.
How many years of self-employment do I need?
Most programs want two years of self-employment history. Some allow one year of tax returns when you have prior experience in the same line of work and the income is strong. When one year of tax returns may work.
Sarah Baraz is based in San Antonio and licensed in Texas, Florida and California. Educational estimate only. This is not a loan offer, pre-approval or commitment to lend, and not tax advice. Actual qualifying income depends on full review of your tax returns, business returns, year-to-date figures, program guidelines and underwriting. Bank statement programs, expense ratios and eligibility vary by lender.