Good accounting and mortgage qualifying are opposites. Every deduction that lowers your tax bill lowers the income a conventional underwriter will credit you for — so the better your CPA, the smaller your approval. That's not a rule of nature; it's a documentation problem. There are four legitimate ways to show what you actually earn, and I use all of them.
“I've had business owners told they qualify for $200,000 walk out with a $650,000 approval — same income, same credit, different documentation method. Nothing changed except who was reading the file.”
Brian MarchandSr. Loan Consultant · NMLS #481563
Which one produces the biggest approval depends entirely on how your money moves. Picking right is most of the work — and it’s a decision, not a default.
Qualifying income comes from your deposits with an expense factor applied. Best for businesses with strong revenue and heavy write-offs. Details.
Your 1099 totals with an expense factor. Simpler and often better priced than statements for contractors.
A profit and loss statement carries the income, sometimes with only two months of statements as support.
For a business whose strong recent year would be unfairly dragged down by a two-year average.
If you've been told your income is too low by a lender who only looked at line 31 of your Schedule C, you're in the right place.
Contractors, tradespeople, consultants, salon owners, restaurant owners — the backbone of my self-employed business.
Real estate agents, insurance agents, delivery and gig drivers, freelancers. Your 1099 totals can carry the loan directly.
K-1 income with legitimate add-backs. This is where careful underwriting finds income other lenders miss entirely.
Two rough years followed by a strong one. A one-year program can use the good year instead of averaging it away.
You reinvest everything and show little. Asset depletion converts your portfolio into qualifying income.
If your DTI has run out, DSCR ignores your personal income entirely and qualifies on the property’s rent.
The order matters. I do the income math before anyone pulls credit or orders an appraisal, so the number you get is the number that closes.
Twelve months of business statements, your last two returns, and your 1099s if you have them. No application yet.
Bank statement, 1099, P&L, one-year return, asset depletion. Side by side, with the real expense factor applied.
I show you what each method produces and what each costs in rate. You decide which trade you want to make.
One well-matched file to the right investor. One credit pull, one underwrite, no shopping your file around.
Typical guardrails across the portfolio programs I use. Pricing moves with credit tier and down payment.
| Method | What you provide | Income calculation | Typical minimums |
|---|---|---|---|
| Bank statement | 12 or 24 months of business or personal statements | Deposits minus transfers, times an expense factor — commonly 50%, or your CPA-stated ratio if lower | 620+ FICO · 10-20% down · 2-yr business history |
| 1099-only | Last 1-2 years of 1099s | 1099 totals with an expense factor applied | 620+ FICO · 10-20% down |
| P&L-only | CPA-prepared profit & loss, sometimes 2 months of statements | Net income from the P&L | 660+ FICO typical · 15-20% down |
| One-year return | One year of personal and business returns | Net income plus legitimate add-backs | 680+ FICO typical · 5+ years in business helps |
| Asset depletion | Statements for eligible accounts | Eligible assets divided by a term to produce monthly income | Varies · large liquid balance required |
| Conventional (full doc) | Two years of returns, K-1s, P&L | Two-year average of net income plus add-backs | 620+ FICO · 3% down · best pricing |
These portfolio products carry a rate premium. That premium buys flexibility you sometimes don't need — and I'd rather save you the money.
If your returns show the income, take the conventional loan. There's no prize for using an exotic program when the cheap one works, and I'll tell you when that's your situation.
Conventional loans →Compare both →Nearly every program — agency and portfolio alike — wants two years, verified by license, CPA letter, or business listing. A six-month-old LLC with great deposits usually isn't enough yet.
Talk through timing →Underwriters back out transfers, owner contributions, and loan proceeds. If gross deposits look large only because money moves between accounts, the qualifying figure collapses.
Asset depletion →Portfolio programs →If the property cash flows, DSCR is cheaper and simpler — no statements to analyze and no expense factor to argue about.
DSCR loans →Portfolio programs are equity-driven — 10% minimum and often more. If you need 3.5% down, FHA with full documentation is the path, even if the income math is harder.
FHA loans →Sometimes the right answer is a conversation with your CPA about how you file going forward, then a conventional loan in twelve months. That's real advice and I give it regularly.
Talk to Brian →The single biggest source of wrong pre-approvals in this business. Here's what an underwriter can actually use — and the add-backs a rushed lender misses.
Send me twelve months of statements and your last two returns and I’ll run the actual calculation under every method. You’ll have a real number in a day instead of a guess — and there’s no credit pull to find out.
Almost never because the borrower doesn't earn enough. Almost always because someone documented it wrong.
The loan officer reads net income from the 1040 and declines a borrower whose real qualifying income is 40% higher once depreciation, home office, and amortization go back in.
This is the most common reason a file someone else killed gets approved with me. I rebuild the income from the returns, the schedules, and the K-1s line by line.
Someone eyeballed gross deposits and quoted a number. Underwriting backed out transfers and owner contributions and the qualifying income dropped sharply.
I run the full analysis myself before you write an offer — transfers out, real expense factor, month by month. My number holds up in underwriting.
No license in the state database, no CPA willing to write a letter, no web presence, or an LLC formed more recently than the business actually began.
We assemble the verification package at pre-approval: license, CPA letter, client contracts, Secretary of State filing. If the entity is newer than the business, we document the predecessor.
The borrower claimed a 15% expense ratio to boost income, then the CPA declined to sign a letter supporting it and the file reverted to the 50% default.
I confirm up front whether your CPA will stand behind the ratio in writing. If not, we build at the default and set expectations honestly from day one.
Year two below year one. The underwriter uses the low year or declines, even though the business is healthy.
I frame the trend with documentation — a one-time expense, a lost-and-replaced contract, a strong year-to-date P&L — so the underwriter sees the real picture instead of two numbers.
A month missing, a summary page instead of full statements, or a downloaded PDF that isn't the official bank document. Underwriting rejects it and the clock keeps running.
I tell you exactly what to pull — all pages, official statements, every month, every account — in the first conversation, and I check completeness before submission.
Already been denied somewhere else? Here's how I take over a dead file →
Yes. Bank statement, 1099-only, and P&L-only programs don’t use returns at all — they use deposits, 1099 totals, or a CPA-prepared statement. These are fully documented, legitimate mortgages, not the stated-income products from 2008. They price higher than conventional because the documentation is different, not because they’re riskier to you.
Two, in nearly all cases — verified by license, CPA letter, or business registration. There are narrow exceptions when you have prior related experience in the same field, such as an engineer who left a firm to consult in the same specialty. Under two years with no related history, the honest answer is a date rather than a program.
For your taxes, no — it’s good work. For conventional qualifying, yes, because those deductions lower the income an underwriter credits you for. That’s exactly what bank statement and 1099 programs solve. You don’t have to choose between paying less tax and buying a house.
It varies with credit, down payment, and which method we use, but plan on a bank statement loan pricing above conventional. Many of my self-employed clients take the portfolio loan to buy now and refinance to conventional in two or three years once returns support it. That’s a deliberate strategy, not a compromise.
Take your average monthly deposits, subtract transfers and owner contributions, apply the expense factor — commonly 50% — and that’s your monthly qualifying income. Send me twelve months of statements and I’ll give you the real figure in a day.
Usually you pick one program or the other — a business-account program with an expense factor, or a personal-account program where qualifying deposits count at 100%. For service businesses that deposit into personal accounts, the personal program often produces far more income.
Generally yes. Most self-employed portfolio programs start around 10% down, with better pricing at 15-20%. If you need 3.5% down, we stay on FHA with full documentation and work harder on the income math.
Possibly a lot. Portfolio programs have expanded, and more importantly, the denial may have been a calculation problem rather than an income problem. Send me the denial letter and last year’s file — that review is free. Here’s how I take over a dead file.
More answers: all 78 questions on income & self-employment →
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