The "Write-Off" Trap
You have a great CPA. They write off your car, your home office, your meals, and your dog as business expenses. You pay zero taxes. You feel like a genius.
Then you try to buy a house. The lender looks at your tax returns and sees you made "zero dollars." Denied.
You can't have it both ways. You either show income to the IRS (and pay taxes) or you show no income (and get no loan). Unless...
Most conventional loans require a 2-year history of self-employment income on tax returns. But "Bank Statement Loans" allow you to use your deposits as income proof—if you have 10-20% down.
Three Strategies for Self-Employed Buyers
Choose the strategy that best fits your timeline, tax situation, and down payment ability.
The "Two-Year Tax" Plan (Cheapest)
If you want the lowest interest rate, you need to play the long game.
- How it works: You file 2 years of tax returns showing a healthy Net Income (Profit).
- The Cost: You will pay more in income taxes those two years because you are taking fewer write-offs.
- The Reward: You qualify for a standard Conventional or FHA loan with low rates and low down payment.
The "Bank Statement Loan" (Fastest)
If you can't wait two years or don't want to pay more taxes, use this.
- How it works: The lender looks at 12-24 months of business bank statements. They add up all your deposits and treat that as your "revenue." They usually assume 50% is profit and 50% is expense.
- The Catch: Interest rates are usually 1-2% higher than standard loans. You typically need 10-20% down payment.
The "Co-Signer" Strategy
If your business is new (under 2 years), you are basically radioactive to lenders. A non-occupant co-borrower (like a parent with a W-2 job) can guarantee the loan. You still own the house, but their income helps you qualify.
Debunking Entrepreneur Myths
Don't let these common misconceptions sabotage your home buying journey.
❌ MYTH: "I make $100k, so I can afford a $400k house."
✅ TRUTH: Lenders look at NET income, not GROSS. If your business grossed $150k but you wrote off $100k expenses, the bank thinks you make $50k. Your "buying power" is based on that $50k number.
❌ MYTH: "I can hide my business losses."
✅ TRUTH: They will see everything. Lenders will ask for your personal returns and your business returns (1120S, K-1s). If your business is losing money, that loss is subtracted from your other income.
The "Proof" Burden
Buying a home as a business owner proves you've "made it." It's satisfying to buy a house with money you generated yourself.
The paperwork is insane. They will ask for a P&L (Profit & Loss) statement, a letter from your CPA, and your business license. It feels invasive.
We'll tell you upfront which documents you need so you don't get surprised 3 weeks into the process.