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Qualifying The Self-Employed – The Good, The Bad, & The Ugly

a self employed man wearing a hat sits at his desk and pets his large brown dogSelf-employed borrowers can still qualify for mortgage financing, and in some ways they actually have advantages.


Self-employed borrowers qualify with previous years’ tax returns, which fortunately will not reflect any slowdowns which might have occurred b/c of the COVID-19 crisis.

Self-employed borrowers can qualify with 2018 and 2019 tax returns, or with 2017 and 2018 tax returns, if they have not filed 2019 returns yet.


Self-employed borrowers will still need to provide “profit and loss” (P&L) statements to cover the periods not covered by the tax returns. But, these P&Ls, which still need to show enough income to qualify, do not need to be audited in most cases, leaving some room for flexibility.

Self-employed borrowers also need to prove that their business remains open, operating and viable. Restaurant owners, for example, with temporarily shuttered operations will have difficulty getting approved.


The ugly has to do with the elimination of most Non-Qualified Mortgage (Non-QM) options. These are the loans that self-employed borrowers, with very limited income on their tax returns, could use to qualify with bank statement deposits and/or rental income (in lieu of tax returns).

The elimination of non-QM loans is what is giving many the impression that self-employed borrowers can no longer qualify for mortgages. But, it is primarily self-employed borrowers who don’t show sufficient income on their tax returns who are having issues.

Some non-QM lenders have returned to the market but the rates, fees and down payment requirements (usually 25% or more), make them not much better than “Hard Money” options (that require no income verifications at all).

Jay Voorhees
Founder/Broker | JVM Lending
(855) 855-4491 | DRE# 1197176, NMLS# 310167