Episode 10 - Self Employed? 5 Tips to Help You Get Approved
“You do not have to guess. With the right documentation plan, self-employed income can qualify for a Utah mortgage.” - Nelson Barss
5 Mortgage Tips for Self-Employed Utah Homebuyers
If you run a business in Utah and want to buy a home, you face a unique challenge. Lenders must see stable, documentable income. That does not mean homeownership is out of reach. With the right plan, you can qualify for a mortgage and keep your business moving forward.
This guide breaks down five practical tips for self-employed buyers. We will cover conventional financing first, then look at smart non-QM options that fit real-world income. If you want a tailored game plan, schedule a quick consultation and get clear on your best path in today’s Utah market.
Conventional vs. Non-QM at a glance
Most Utah homebuyers start with conventional, FHA, VA, or USDA loans. These programs use tax returns and typically average two years of income. If conventional is not a fit, non-QM programs can use bank statements, 1099s, or a CPA-prepared profit and loss to document your ability to repay.
Pro tip: Always see if conventional works first for the best rates and lower down payments. If it does not, compare non-QM quotes before you change your tax strategy. Book a consult to model both paths side by side.
Tip 1: Use a one-year average if you have 5+ years in business
A weak first year can anchor your two-year average. Many self-employed buyers have one low year followed by a strong year and get frustrated by the average. If you have been in business for five years or more, guidelines often allow a one-year average using only the most recent year.
Do not wait unnecessarily if last year was strong and the prior year was the outlier. Ask for an income review to confirm whether a one-year average applies.
Tip 2: Count every allowed add-back before you assume you do not qualify
Underwriters look at bottom-line profit, not top-line revenue. That is only the starting point. Many items can be added back to qualifying income, including depreciation, depletion, reasonable owner salary paid to yourself, and certain one-time losses like theft or disaster when properly documented.
Before you accept a decline, submit two full years of returns and let an expert run the worksheets. A correct add-back calculation can be the difference between a decline and an approval. Set a time to review your returns and see your true qualifying income.
Tip 3: Make depreciation your friend
Depreciation can reduce your tax bill while improving your mortgage calculation. If you expense equipment, that expense cannot be added back. If you depreciate it, the tax benefit remains and the depreciation can be added back to income for qualifying.
Talk with your tax professional about when depreciation makes sense compared to expensing. In some cases, amending returns or planning future purchases with depreciation in mind can increase purchase power without overstating income.
Tip 4: Have the business pay business debts from the business account
Many owners carry business credit cards, vehicles, or equipment loans that show on personal credit. If the business pays those debts from the business bank account for 12 straight months, lenders can often exclude those payments from your debt-to-income ratio.
Start now if you are not already doing this. One personal payment within the last 12 months can disqualify the exclusion. Setting this up today can help you qualify on your next purchase or refinance.
Tip 5: Compare non-QM programs when taxes will not tell the full story
If conventional will not work, non-QM loans verify income without tax returns.
Options include:
Bank statement loans using 12 to 24 months of business deposits with an expense factor.
1099-only programs with an applied expense factor instead of tax write-offs.
CPA-prepared profit and loss to document income directly.
DSCR loans for rentals that qualify based on market rent covering the mortgage. This is for investment properties, not primary homes.
Expect larger down payments and a higher rate than conventional, but sometimes only modestly higher. Get a side-by-side quote to see whether paying more taxes to fit conventional is actually worth it.
Myth buster: W-2 yourself and qualify faster
Creating payroll for yourself does not shorten the two-year timeline for self-employed income. Lenders average salary and business profits together. Raising your W-2 while lowering business profit usually nets out the same. Family payroll changes are scrutinized and often require extended history. Plan ahead and document stability.