Self-employed? The documents to gather before you apply for a mortgage

Start with four things almost every lender asks a self-employed borrower for: complete bank statements, every page, for the months your program uses; proof that your business exists and is open, such as a letter from your CPA or tax preparer, a business license or a filing; a short description of what the business does; and statements for the down payment, closing costs and the savings you will have after closing. Then add what your income route needs: 1099 forms for a 1099 loan, a profit and loss statement your tax professional signs, investment and retirement statements for an asset-based loan, or your tax returns for the standard route.

Gathering these before you apply is the surest way to shorten the process. Here is the list, route by route.

What almost every route needs

• Photo identification for each borrower.
• Complete statements for the accounts that hold your down payment, closing costs and reserves, every page, as your bank issues them.
• Proof the business exists and is open. The lender also confirms it is still open shortly before closing.
• A short description of the business and how many people it employs.
• Your purchase contract once you have one, or your current mortgage statement on a refinance.

Lenders are required to look at your income, assets, employment, credit history and monthly expenses, and to document what they rely on. Having the papers ready is how you keep that step short.

The bank statement route

• Twelve or twenty-four consecutive monthly statements, depending on the program, every page.
• If you use personal statements: a few recent business statements that show the transfers to you.
• If you use business statements: your ownership share, and, where the program uses it, a statement from your CPA or licensed tax preparer of the business’s expense share.
• A short letter for any large deposit that is not routine.

The 1099 route

• Your 1099 forms for the years the program uses. The form for nonemployee pay is the 1099-NEC.
• Proof of your earnings so far this year.
• Your signed consent for the lender to get the IRS record of your forms. Lenders use the IRS’s income verification service for this, and the IRS releases records only with your consent.

The profit and loss route

• A profit and loss statement for the business, prepared and signed by your CPA or licensed tax professional.
• A few recent business bank statements, which are usually requested as well.

The asset route

• Statements for each account you want counted: bank, brokerage and retirement.
• The withdrawal terms of any retirement plan you use.
• A short explanation of any large or unusual deposit.
• An access letter from anyone who shares an account but is not on the loan.
• Proof of any other income you want added, such as a pension.

The standard route, with tax returns

If your returns show your income well, the standard route can be the simplest. Fannie Mae’s guide generally looks for two years of signed personal federal tax returns with all schedules, and business returns where they apply, with one year accepted in some cases. The lender also works out your income from the returns using a cash flow analysis, so have every schedule ready.

Habits that keep the file moving

• Keep business and personal money in separate accounts if you can. Mixed accounts are usually treated as business accounts.
• Avoid unexplained cash deposits in the months before you apply.
• Do not open new credit or make large purchases on credit while your loan is in process.
• Keep your business license and filings current, because the business is checked again before closing.
• Answer document requests quickly. Each day a request waits is a day added to the timeline.

Frequently asked questions

How many months of bank statements do I need?

Programs use one or two years of consecutive monthly statements. Your loan officer tells you which your program uses before you gather them.

Do I need a CPA?

Not for every route. A profit and loss loan needs a statement from your CPA or licensed tax professional. On a bank statement loan, a CPA letter is one way to show the business exists; a business license or filing can also work.

Should I send my tax returns anyway?

Not on a bank statement loan unless you are asked. If tax returns are in the file, the loan usually has to be reviewed as a full-documentation loan instead.

Can my spouse’s paycheck be added?

Often, yes. Many programs let a co-borrower’s wages, documented the usual way, be added to your bank statement or 1099 income.