Disclaimer: Citi may have different eligibility criteria and/or product offerings than those mentioned on mortgage.com.

When lenders talk about being self-employed, they mean a wide range of work situations, from part-time gig workers to full-time business owners. You’re generally considered self-employed if you’re:

• A sole proprietor: You own and run the business yourself, and the business isn’t legally separate from you. Income and expenses typically show up on your personal tax return.
• A freelancer or independent contractor who receives 1099 forms: You work for yourself rather than for a single employer, often taking on projects or clients throughout the year. Instead of a W-2, clients report what they pay you on 1099 forms.
• An owner of an LLC or partnership: You share ownership of a business with one or more people or operate through a limited liability company. The way you get paid depends on how the business is set up.
• A business owner with a significant ownership stake: You may get a regular paycheck, but because you own a large portion of the business, lenders still look at how the company’s doing when reviewing your mortgage application.

If you don’t pocket the same amount on a predictable biweekly schedule, you’re not alone. Income swings are normal when you work for yourself, and lenders take that into account when reviewing your application.

When lenders for a mortgage review an application, they’re not focused on job titles. Instead, they want to understand whether your income can reliably support a home loan over time.

To do that, lenders usually look at your earnings over the past one to two years and calculate an average. If your income has stayed steady or grown, that can work in your favor. If it’s dipped at times, lenders may ask a few follow-up questions to better understand why.

Another factor that comes into play? Tax deductions. While deductions help reduce your tax bill, they can lower the income lenders use when determining how big of a loan you qualify for. It’s one reason self-employed borrowers might need to plan a bit further ahead.

Every mortgage application is different, but lenders generally look for a few common signals of financial stability:

• A steady income history: Lenders usually like to see a track record of self-employed income, often going back about 2 years.
• Good credit: Your credit score and history help lenders see how you’ve managed credit in the past. Strong credit can be especially helpful for self-employed borrowers because it shows reliability, even when income isn’t perfectly predictable.
• Manageable debt: Lenders look closely at your debt-to-income ratio (DTI), which compares your monthly debt obligations to your income. A lower DTI may make a lender feel more comfortable that you can take on a mortgage alongside your other financial responsibilities.
• Consistent or growing business revenue: Lenders focus on patterns, not one standout month. Steady earnings (or income that trends upward over time) can show that your business is solid.
• An active business: Lenders want to confirm that your business is currently operating and earning money so you can pay back what you borrow.

Remember: You don’t need your finances to be perfect. The goal is to show that your income, even if it varies month to month, is dependable over time.

When you’re self-employed, lenders usually ask for a few more documents than they would from someone with a traditional paycheck. That can feel stressful at first, but it’s completely normal. Lenders are just trying to get a better idea of your income and business.

You might be asked to show:

• Personal tax returns from the past 2 years
• Business tax returns from the past 2 years
• Year-to-date profit and loss statements
• Balance sheets
• Personal and business bank statements
• A business license, if applicable
• Verification letters from a CPA, in some cases

Having these documents organized and responding promptly can help the process feel smoother and less overwhelming.

A little preparation can make a big difference. Before applying, consider taking these steps:

• Review your credit early: This gives you time to address any issues, like a mistake on your report
• Reduce outstanding debt: Lower balances can show lenders you’re ready to take on a mortgage
• Separate business and personal finances: Clear records make it easier for lenders to review your income
• Be mindful of tax deductions: Large write-offs can limit qualifying income
• Build cash reserves: Savings can help show stability during slower months
• Share current financials: Up-to-date statements help tell your story

Self-employed borrowers often face a few common challenges during the mortgage process, but the good news is that each one can be addressed with the right preparation. 

Income that changes month to month

This is common for self-employed borrowers. Lenders usually look at longer-term income trends rather than any single month to understand how your business is doing. 

Tax deductions that lower qualifying income 

Deductions can reduce the income lenders use for qualification. Planning ahead can help set clear expectations and avoid surprises. For instance, you might choose not to take a big deduction on new office equipment the same year you’re planning to buy a home. 

Requests for additional documents

Follow-up questions and document requests are a normal part of the process, not red flags. They help lenders build a complete picture of how your income works. When you get these requests, being quick and responsive can help move your application along.

A newer business 

If your business hasn’t been operating for long, lenders may take a closer look. Consistent records and proof of ongoing activity can help demonstrate stability.

While these challenges can feel frustrating, they’re also very common. With clear records and timely responses, most issues can be addressed without derailing your timeline.

If you’re self-employed, certain loan options may offer a bit more flexibility, depending on your financial situation:

• FHA loans: These government-backed loans often allow more flexibility around credit history and qualifying requirements.
• Bank statement loans (where available): Some lenders may review personal or business bank statements instead of tax returns to get a better idea of cash flow, which can be helpful if deductions reduce your reported income.
• Non-qualified mortgage loans: These loans fall outside traditional lending rules and might rely on alternative documentation, like bank statements, to show income that doesn’t come from a regular paycheck. Just remember, though: These types of loans don’t fall under Consumer Financial Protection Bureau (CFPB) protections and may involve higher down payments or interest rates.
• Programs like the Citi HomeRun® mortgage: Designed to support eligible buyers, these mortgage options have more flexible credit guidelines, especially when your income doesn’t come from a traditional paycheck. 

Breaking the mortgage process into smaller steps can make it feel far more approachable, especially when you’re self-employed. Here’s how it typically unfolds:

1. Take a close look at your income and credit: Start by reviewing your recent income trends and credit profile so you have a clear sense of where you stand. This can help you spot any areas you may want to address before applying.
2. Gather key documents early: Pull together tax returns, financial statements and bank records ahead of time. Having everything ready can help keep the process smooth when it comes time to apply.
3. Get prequalified or pre-approved: This step gives you a better idea of your price range and shows sellers that you’re serious and prepared.
4. Submit your application and documents: Once you apply, you’ll share the supporting paperwork lenders need to review your income and finances in more detail.
5. Respond quickly to follow-up requests: It’s common for lenders to ask questions or request additional documents. Quick responses can help keep things on track.
6. Review final documents and close: Before closing, you’ll review the final paperwork and confirm the details. Once everything’s signed and you’ve made your down payment, you’re on your way to homeownership.