Mortgages for self-employed borrowers in California.
Lenders generally count self-employed income from your tax returns, usually averaging about the past two years after business expenses. When you own the business, your tax return is written to show what is left after expenses, and that is the figure most lenders use. Sam Batayneh works with business owners, partners and independent contractors across California, and explains how lenders read business income before you make an offer.
What makes business income different.
What a business brings in and what a lender counts are rarely the same figure.
Income after expenses
Lenders generally count what your tax returns show after business expenses, not what the business takes in. Write-offs that lower your tax bill also lower the income a lender can count.
K-1s and 1099s
Owners of partnerships and S corporations receive a K-1, and independent contractors receive 1099s. Lenders read these together with the full tax returns, not on their own.
Uneven years
A business can have a strong year and then a slow one. Lenders usually look at more than one year, and a recent drop gets a closer look than a recent rise.
How lenders generally look at business income.
Each lender sets its own rules. These are the questions most of them ask.
How long you have been in business
Lenders often want about two years of self-employment shown on tax returns. A shorter history may be considered when you did the same kind of work before.
What the returns show
Lenders generally work from your personal returns, and from the business returns when you own a large share of the company. Some paper expenses, such as depreciation, are often added back.
The direction of the income
Income is usually averaged over the years reviewed. If the most recent year is lower, a lender may use the lower figure, or ask why it fell.
The health of the business
Some lenders ask for a profit and loss statement for the year so far, and look at whether the business can afford the money you take out of it.
Other ways to document income
Bank Statement loans, a program named on Sam’s OriginPoint page, look at deposits over time in place of tax returns. They have their own rules and are not right for everyone.
What to have on hand.
Your CPA or bookkeeper will know most of this list. Sam will say exactly what is needed.
- Tax returns. Usually two years, personal and business, with all schedules.
- K-1s and 1099s. For each business or payer.
- This year so far. A profit and loss statement, if the lender asks for one.
- Accounts. Recent statements for personal and business bank accounts.
- Your business. A business license, or a letter from your CPA, showing how long you have been self-employed.
Programs to ask Sam about.
Income shown on tax returns is usually documented for a conventional or a jumbo loan. OriginPoint’s Bank Statement loans document income from bank deposits in place of tax returns; OriginPoint’s name for its program in this area is OriginPoint Portfolio | Self-Employed.
Program names are OriginPoint’s. Which one fits depends on your own file, and naming a program here is not a promise that a loan will be approved.
Plain answers.
How do lenders count self-employed income?
My tax returns show less than my business brings in. What can a lender count?
Do I need two years of self-employment?
How is K-1 income counted?
Can I use money from my business for the down payment?
General education only. Each lender sets its own rules, and they change. Nothing here is a promise that a loan will be approved or of any terms. This is not tax, legal or investment advice: for those questions, ask your own CPA, attorney or business manager.
Limits where you’re buying.
Each page has the county’s 2026 limit and what is different there.
Own the business?
Tell Sam how you’re paid and how you file. Sam will explain how lenders are likely to read it.