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Best Mortgage Lenders For Self-Employed

For first-time home buyers who want to own a house without having the cash to pay for it, mortgages are good alternatives. However, if you’re self-employed, getting your home loan request approved by a lender can be a little bit difficult.

There are numerous reasons why the above is so and one of them is lending standards. For instance, some lenders require three years of account statements, while others may require more, or greater detail about your business, such as business license and profit and loss statements. To limit the tax bite, many self-employed home buyers look to use every available deduction to lower their income, something that can be a detriment when looking to borrow for a mortgage. Overall, these requirements can be daunting to deal with; thankfully, some lenders are experienced in working with self-employed borrowers and can help make the mortgage application process as seamless as possible for home buyers.Below, we’ve created a list of the best mortgage lenders and their loan programs for self-employed individuals. Our picks target different aspects of requirements and offers. If you’re having difficulties finding a lender to help you, one of our choices may have the exact solution you need. In addition to this, we have you’ll want to read until the end to also find out how to improve your chances of getting your mortgage and real estate loans approved. Let’s get into it.

Table of Contents:

  1. Self-Employed Mortgage Lenders Review
  2. Challenges Faced By Self-Employed Mortgage Seekers
  3. Available Mortgage Offers for the Self-Employed
  4. Increasing Your Chances for Mortgage Approval as a Self-Employed Individual
  5. Key Takeaways

Best Mortgage Lenders For Self-Employed

North American Savings Bank
Nationwide 680 Learn More
Magnolia Bank
Nationwide 580 Learn More
Angel Oak
45 states 600 Learn More
Acra Lending
35 states 600 Learn More
Pure Funding
TX and TN Only 620 Learn More

Self-Employed Mortgage Lenders Review

Take a look at these quick reviews to make comparisons and choose the best institution for you. 

North American Savings Bank

Who is it good for?

Mortgage seekers across the whole United States without adequate tax returns documentation.

  • Does not require you to show net income on tax returns
  • Requires only 12 months of bank statements 
  • Allows a 45% debt-to-income (DTI) ratio
  • Comparatively high credit score requirement of 680
  • 15% down payment
  • Comparatively lower LTV rate acceptance, as mortgage covers 85% of home value
  • Requires tax and insurance escrows

Magnolia Bank

Who is it good for?

Self-employed individuals with very low credit scores and high-risk LTV ratios who seek high-valued mortgage funding.


  • Requires a credit score of 580 with FHA loan option
  • Low down payment of 3.5% on FHA mortgage.
  • High LTV rate acceptance, as mortgage covers 97.75% of home value.
  • Mortgages of up to $10 million.
  • Additional benefits for veterans or individuals with spousal affiliations with military personnel. This is through VA mortgage offers that don’t require a down payment, accept 100% LTV, and charge zero monthly Private Mortgage Insurance (PMI).
  • Fast mortgage processing.
  • Available across all US states.


  • No flexible offer on the required length of your statement of accounts.
  • No offers on reducing self-employment history requirements.

Angel Oak

Who is it suitable for?

Self-employed mortgage seekers across the entire United States running businesses without 100% ownership.


  • Requires as little as 25% ownership of your business if you present qualified personal bank statements.
  • Accepts 12-month bank statement history.
  • Loans up to 90% LTV .
  • Loans of up to $3 million.
  • All offers are applicable for owner-occupied, second, and non-owner-occupied homes.
  • Available across all US states.


  • All rates are fixed for 30 years, meaning you pay higher interest rates and don’t benefit from falling interest rates. This, however, serves as an advantage against rising interest rates.
  • Two-year self-employment criteria
  • Requires 24-month statements in some cases

Acra Lending

Who is it good for?

Mortgage seekers with low credit scores and historical bank statements that span only a short period. Great for those who additionally need high-valued mortgage funding.


  • Get approved for loans with 3-month bank statements.
  • Requires a low credit score of 600.
  • Available in 39 US states including New York and  Washington DC.
  • Loans of up to $4 million.


  • Requires 20% down payment.
  • Submitting a 3-month statement grants you the least-favorable loan conditions. You have to submit bank statements covering longer periods to enjoy better deals on loan amounts and rates.

Pure Funding

Who is it good for?

Self-employed mortgage seekers in Texas and Tennessee who need a program to simultaneously build their credit scores for better mortgage options.


  • Extended credit consultancy service.
  • Fast-tracked applications through pre-approvals.


  • Requires a two-year-long W-2 statement.
  • Only available in Texas and Tennessee.

Challenges Faced By Self-Employed Mortgage Seekers

The challenges you have as a self-employed mortgage seeker mostly boil down to proving your income. There are two factors lenders have a problem with namely; verifying your income as a self-employed or business owner and trusting that this income remains reliable going forward.

1. Extended Documentation Requirements

Employees of a company typically produce their W-2 statements and even tax returns as proof of income when seeking a mortgage from a lender. Lenders can easily verify their status of employment and the accuracy of the W-2 statement, as well as any other income statement submitted from employers. As a self-employed individual, to verify and limit their risk with you, institutions require you to produce a range of personal or business income statements along with years of tax return data. They will confirm that you have been self-employed for several years and that your income from this self-employment has been reliable over these years.

2. Larger Down Payments

Self-employed individuals face the risk of lacking income for some period. This inconsistency in income is why lenders typically require larger down payments. A larger down payment serves as a safety net for lenders as it reduces the mortgage amount and, hence, reduces the risks in case of a default in payment.

For comparison, while the required down payment on conventional loans for employed individuals averages between 3% to 6% of the home value, self-employed individuals are typically required to pay an average of between 10% to 20%. Even non-QM and bank statement loans require this amount of downpayment.

If a large down payment is a major challenge, self-employed individuals may then resort to FHA loans. These government-backed loans demand a down payment of just 3.5% of the home value.

3. Higher Credit Scores

As a self-employed individual, you have to worry about sorting or even scaling up your business’ operational costs. You do this from your limited and inconsistent disposable income, and this makes lenders wary about your ability or dedication to paying back loans. Lenders then require high credit scores from you, as this is the indication they need to confirm your attitude toward loan repayment.

The average FICO score requirement for a conventional mortgage loan is 620. Self-employed individuals may qualify for a loan with this credit score but your loan conditions are typically unfavorable. To get better terms and rates, you are then required to have a credit score of 700 or even higher. 

Available Mortgage Offers for the Self-Employed

Thankfully, there are particular options you may utilize as a self-employed individual to get yourself on more favorable grounds. The types of mortgage loans you have access to include:

  • Fannie Mae and Freddie Mac Self-Employed Mortgages
  • FHA Mortgage 
  • Bank Statement Loans

1. Fannie Mae and Freddie Mac Loans

Fannie Mae and Freddie Mac are home mortgage companies created by the US Congress, but they are not mortgage lenders. Both government-backed companies buy mortgages from lenders and bundle loans together into mortgage-backed securities, which are sold to investors. This keeps the mortgage market liquid, ensures credit is always available, and makes mortgages affordable. 

Fannie and Freddie set a range of standards and requirements for mortgage loans and mortgage payments they purchase. In turn, this affects retail loan company requirements for borrowers, including self-employed individuals. For self-employed mortgage borrowers to qualify for a Fannie Mae or Freddie Mac-backed mortgage, they must meet the following requirements:

  • A minimum credit score of 620
  • At least two years of self-employment or one year of self-employment and a documented two-year account of similarly-derived earnings
  • Minimum down payment of 3.5% to kickstart mortgage process
  • Debt-to-income ratio commonly placed below 45%

According to both companies, an individual is self-employed if you have an ownership share of 25% or more in a registered business.

2. FHA Loans

Federal Housing Authority (FHA) loans are lending programs backed by the FHA, a federal government agency. FHA-backed mortgages are usually aimed at low and middle-income individuals who have difficulty meeting conventional credit requirements but are also available for self-employed borrowers, too.

To qualify for these FHA loans, you need to meet the following requirements:

  • A minimum credit score of 500 (lenders may require a higher score, however)
  • Self-employment for at least two years
  • Fully-documented two-year income statements
  • Account for two-year tax returns
  • No bankruptcies in the previous two years
  • Minimum down payment of 3.5%

To qualify as a self-employed individual, the FHA also requires you to have a 25% claim in a registered business. 

3. Other Options – Non-QM loans

Non-qualified mortgage (non-QM) loans are loans that have requirements that are different from the Consumer Financial Protection Bureau’s (CFPB) guidelines for other mortgages. These loans allow for the use of unconventional documentation, such as using data from bank statements and assets in the underwriting process.

Bank Statement Loans

Bank statement loans are the default type of loan offered by lending institutions working with self-employed individuals. Instead of traditional documents like a W-2 statement, these loans use information from alternative documents (i.e., bank and other asset statements). The documents used for these loans include

  • 12 to 24-month personal or/and business bank statements

Other requirements are typically dependent on the lending institution you opt for. For instance, a few lending institutions, such as Acra Lending, even allow for as little as just 3 months of personal finance history or business account statements. If you are recently self-employed, these are the kinds of offers you’ll want to look for. 

Asset-Based Mortgage Loans

Asset-based mortgage lenders evaluate the value of any investments you have and allow you to use certain assets as collateral in case you don’t repay the mortgage loan. Although requirements depend on the lenders, to qualify for asset-based mortgages, you generally need

  • High-value assets. The value of your asset is determined by either comparing the price of similar assets recently sold or appraised through a qualified valuation expert.
  • Assets that are low-depreciating or high appreciating
  • Liquid assets that can be easily converted to cash

A couple of other favorable mortgage options and mortgage programs include joint mortgages with a W-2-employed individual and mortgages guaranteed by co-signers.

Increasing Your Chances for Mortgage Approval as a Self-Employed Individual

Now, what if you still don’t qualify for these mortgage offers to get the house of your dreams? Apart from finding lenders that specialize in providing mortgages to self-employed applicants, there are certainly other measures you may take that may help improve your chances of qualifying. 

1. Reduce Your Debt to Income (DTI) Ratio

Your DTI is one of the factors used by lenders in risk assessment. If your DTI is high before a loan application for homeownership, this will limit your ability to borrow new money. To help maximize your chances of getting the loan you need, you’ll want to pay down debts before applying. 

You can help keep your DTI ratio low by borrowing a smaller mortgage loan, too. Instead of taking the maximum mortgage offer your current income covers, go for a lower dollar amount. If you can’t currently reduce your debt load, and a smaller loan amount won’t work for your situation, it might be better to wait before trying to borrow for a mortgage. A higher income will lower your DTI ratio; lifting your income may also require making changes to the way you may have used tax deductions to lower your income. Of course, it’s a good idea to talk to your accountant or a trusted tax advisor before you consider applying for a mortgage. 

2. Improve Your Credit Score

An excellent credit score makes you a less risky investment for mortgage lenders. To keep yours high or to help it improve, it’s important to make payments on time to all of your credit accounts. That said, one great way to directly improve your credit score is keeping your credit utilization rate (CUR) low. Your credit utilization rate compares the amount of credit you currently owe to your total credit limit. The lower this rate is, the better your profile as a borrower may be. 

Keeping your credit utilization rate below 30% is enough to get a good credit score, and keeping it below 10% may help you get an excellent credit history. Some ways to lower your CUR include decreasing spending, paying down balances on time, increasing credit limits, and keeping unused credit cards open.

While moving to improve your CUR, remember that working with credit consultants like Pure Funding, for example, is a great place to start.

3. Increase Your Cash Reserves

Building your cash reserves doesn’t just make larger down payments more feasible. A large cash reserve indicates that you have money to continue making payments even when monthly income from your business takes a hit. Lenders associate you with having a reduced risk profile and you stand a higher chance of getting your mortgage approved. A lender may require you to hold anywhere from two to six months of monthly payments in reserve.

4. Increase Down Payments

Placing a down payment of 20% allows you to waive your private mortgage insurance (PMI) payments. Waiving your PMI then leads to reduced monthly payments and may allow your lender to charge lower interest rates. While a 20% down payment is difficult to make, if you can achieve this and still have emergency funds left over it may get you access to some of the best loan offers available.

Key Takeaways on self-employed mortgage borrowing

The inconsistency in income and difficulty in verifying income makes mortgage loans difficult to obtain for self-employed people. Simply put, lenders see you as having a higher risk profile than a borrower who is drawing a salary

 Even though it may be difficult, the solution to this is to limit your risk profile by patiently improving your credit score, DTI, and cash reserves. You should also look for lenders dedicated to providing solutions for self-employed individuals like you. 

Look for FHA-certified lenders, find institutions that provide flexible offers using only bank statement requirements, or try to meet the requirements of lenders with offers that seem perfect to you. Picking the best mortgage lender as a self-employed individual is all about selecting an institution that is both capable of and interested in serving self-employed borrowers like you. Others have done it, and so can you.