How to Get a Mortgage as a Freelancer (It’s Harder But Not Impossible)

My mortgage broker’s first question: “How long have you been self-employed?” When I said “three years,” she relaxed. If I’d said “one year” or “six months,” the conversation would have ended there. Most lenders require a minimum of 2 years of self-employment history.

Getting a mortgage as a freelancer is absolutely possible — I did it. But it requires planning that W-2 borrowers never have to think about. Here’s what I learned through the process.

The 2-Year Requirement

Most lenders (conventional, FHA, VA) require 2 years of self-employment tax returns showing consistent or growing income. This is non-negotiable for most loan products.

What “2 years” means: Two complete tax returns (not 2 calendar years of freelancing). If you started freelancing in March 2024, your first full tax return is for 2024. You won’t have your second return until you file for 2025 — which means you can’t apply until early 2026.

Exception: Some lenders accept 1 year of self-employment with a strong explanation (e.g., you were in the same field as an employee for 5+ years before going freelance). These are harder to find but exist.

How Lenders Calculate Your Income

This is the part that trips up freelancers: lenders use your NET income from Schedule C, not your gross revenue.

All those wonderful tax deductions that reduce your tax bill? They also reduce your qualifying income for a mortgage.

Example:

• Gross freelance revenue: $100,000
• Business deductions: -$20,000
• Net income (Schedule C, Line 31): $80,000

What the lender sees: $80,000 income. Not $100,000.

They average 2 years of net income:

• Year 1 net: $65,000
• Year 2 net: $80,000
• Qualifying income: ($65,000 + $80,000) ÷ 2 = $72,500

The freelancer’s dilemma: Every dollar in deductions saves you ~$0.28 in taxes but reduces your qualifying income by $1. The year before applying for a mortgage, some freelancers strategically take fewer deductions to show higher net income. A $5,000 reduction in deductions costs ~$1,400 in extra taxes but increases qualifying income by $5,000 — potentially qualifying you for $20,000-25,000 more in mortgage.

Discuss this tradeoff with your CPA.

What Lenders Want to See

Stable or growing income. If Year 1 was $80K and Year 2 was $60K, lenders get nervous. Declining income is a red flag. If income increased or stayed stable, you’re in good shape.

Clean tax returns. No amendments, no unfiled years, no IRS payment plans (learned this the hard way — my year-1 payment plan was resolved before I applied, thankfully).

Good credit score. 740+ gets you the best rates. 700-740 is fine. Below 680 makes conventional loans difficult.

Low debt-to-income ratio. Total monthly debt payments (mortgage + car + student loans + credit cards) should be under 43% of gross monthly income, ideally under 36%.

Down payment. 20% down avoids PMI ($100-300/month insurance). 10% down is common. Some programs accept 3-5% but rates are higher.

Cash reserves. Lenders want to see 3-6 months of mortgage payments in savings after the down payment. Your emergency fund counts.

Documents You’ll Need

• 2 years of personal tax returns (with all schedules)
• 2 years of business tax returns (if S-Corp)
• Year-to-date P&L statement
• 2-3 months of bank statements (business and personal)
• 1099s from the current year
• Business license or LLC documents
• Letter from CPA confirming self-employment status

My tip: Start gathering these 3 months before you plan to apply. Missing documents delay the process by weeks.

The Loan Types

Conventional (Fannie Mae/Freddie Mac): Standard option. 2 years self-employment history, 620+ credit score, 3-20% down. Best rates for strong borrowers.

FHA: More lenient on credit (580+ with 3.5% down). Still requires 2 years self-employment. Mortgage insurance required.

Bank statement loans: Non-QM lenders that use 12-24 months of bank deposits instead of tax returns to verify income. Higher rates (1-2% above conventional) but useful if your tax returns don’t reflect your actual cash flow.

VA loans: If you’re a veteran. Excellent terms, no down payment. 2 years self-employment still required.

My Mortgage Application Timeline

Year 1-2 of freelancing: Not eligible (needed 2 years of returns).

Year 3 (preparation): Cleaned up credit (paid off a small collection), maximized net income on tax return (strategically took fewer deductions), built 20% down payment.

Month 1 of process: Got pre-approved. Broker reviewed 2 years of returns, calculated qualifying income at $72,500 average.

Month 2-3: House hunting. Found a property. Submitted full application with all documents.

Month 3-4: Underwriting. They asked for additional documents 3 times — YTD P&L, CPA letter, explanation of income variation. Normal for self-employed borrowers.

Month 4: Approved. Closed on the house.

Total timeline from pre-approval to closing: about 90 days. Longer than the typical 30-45 days for W-2 borrowers because of additional document requirements.

Tips From My Experience

1. Find a lender experienced with self-employed borrowers. Not all loan officers know how to read Schedule C. Ask “how many self-employed borrowers do you work with?” before committing.

2. Don’t switch accountants or software during the 2-year period. Consistency in documentation matters.

3. Keep business and personal finances clean and separated. Lenders will scrutinize both accounts.

4. Avoid large, unexplained deposits. If a client pays a $15,000 project deposit, be ready to document it. Large deposits require paper trails.

5. Don’t make major business changes before applying. Don’t switch from sole proprietor to S-Corp, don’t form a new LLC, don’t change your business name. Stability is what lenders want to see.

The Bottom Line

Freelancers can absolutely get mortgages. The process requires more documentation, more patience, and strategic planning around income reporting. Start preparing 2 years before you want to buy: build credit, maximize net income, save for a down payment, and keep clean financial records.

The extra effort is worth it. Homeownership as a freelancer — with the mortgage interest deduction and building equity — is entirely achievable with proper preparation.