If you own a business, work as an independent contractor, freelance, or receive 1099 income, you may have experienced one of the most frustrating parts of getting a mortgage:

Your business is doing well, but your tax returns don't seem to show enough income to qualify for the home you want.

This happens frequently with self-employed borrowers.

The good news is that being self-employed does not prevent you from getting a mortgage. The key is identifying the loan program that evaluates your income in a way that fits how you actually earn money.

At Premiere Capital Mortgage, this is one of the areas where having access to multiple types of financing can make a significant difference.

Traditional mortgages can work for self-employed borrowers

Self-employed borrowers can qualify for conventional and FHA mortgages.

But lenders must document that the income is stable, sustainable and sufficient to support the mortgage.

For conventional financing, current Fannie Mae guidance generally calls for lenders to evaluate a two-year history of prior earnings. However, Fannie Mae also allows certain borrowers with less than two years of self-employment to be considered when their most recent tax returns show a full 12 months of self-employment and their previous income and work experience meet specific requirements.

That means the common statement that “you must be self-employed for two years to get a mortgage” isn't universally true.

The details matter.

FHA also has self-employment guidelines

Current FHA guidance generally permits self-employment income when the borrower has been self-employed for at least two years.

There is also an important exception.

If you've been self-employed for between one and two years, FHA may allow the income when you were previously employed for at least two years in the same or a related occupation, subject to the complete underwriting requirements.

FHA also pays close attention to the stability of business income. A significant decline in income can require additional documentation and analysis.

HUD published another update to its FHA Single Family Housing Policy Handbook on August 12, 2026, so using current guidelines rather than relying on old internet articles is important.

Current FHA Single Family Housing Policy Handbook

Why tax returns sometimes create a problem

Business owners naturally want to take legitimate business deductions.

Those deductions can reduce taxable income.

That's good for tax purposes, but it can sometimes create a mortgage qualification challenge because traditional underwriting doesn't simply look at the gross revenue entering your business account.

An underwriter analyzes the applicable tax returns and business documentation to determine qualifying income.

That's why someone can have a business generating substantial revenue and still be told:

“Your qualifying income isn't high enough.”

Before accepting that answer, however, it can be worth examining alternative mortgage programs.

Bank-statement loans can provide another route

A bank-statement mortgage is generally a Non-QM, or non-qualified mortgage, product.

Instead of relying exclusively on traditional tax-return income calculations, certain bank-statement programs can evaluate deposits over a specified period—commonly 12 or 24 months—to determine qualifying business or personal income.

The exact calculation varies considerably by lender.

For business accounts, for example, an expense factor may be applied to deposits when determining usable income.

This is why two lenders can sometimes evaluate the exact same self-employed borrower differently.

Bank-statement programs can be particularly useful for:

Business owners, independent contractors, consultants, real estate professionals, freelancers and other borrowers whose taxable income doesn't fully reflect their cash flow.

These programs are not a way around demonstrating the ability to repay a mortgage. They simply use alternative documentation to evaluate income.

Rates, down-payment requirements, reserves and credit requirements can also differ from conventional financing.

Don't overlook profit-and-loss programs and other Non-QM options

Bank statements aren't the only alternative.

Depending on the lender and borrower profile, Non-QM financing may include programs using alternative income documentation such as a professionally prepared profit-and-loss statement, 1099 income or other permissible documentation.

And if you're purchasing an investment property, a DSCR loan may provide another option because qualification can focus primarily on the property's rental cash flow rather than the borrower's personal employment income.

The right program depends on what you're buying and how your income is structured.

What is happening in the Murrieta and Temecula housing market?

Local buyers have an interesting market right now.

Over the three months ending July 2026, Murrieta's median sale price was approximately $659,670, down 3.7% year over year. Homes averaged about 44 days on market, and 37.4% had price reductions.

Temecula looked different: its median sale price was approximately $740,000, up 2.0% year over year, with homes averaging about 37 days on market.

That difference illustrates why broad Southern California headlines don't tell the whole story.

Local conditions matter.

For some Murrieta buyers, increased time on market and price reductions may create opportunities to negotiate with sellers—including potentially requesting seller credits where permitted by the loan program.

What about mortgage rates?

As of September 3, 2026, Freddie Mac reported that the national average 30-year fixed-rate mortgage was 6.71%, compared with 6.66% the previous week. The 15-year average was 6.04%.

Freddie Mac's latest mortgage-rate survey

Those figures are national conventional benchmarks—not Premiere Capital Mortgage rate quotes and not necessarily representative of FHA, bank-statement or Non-QM pricing.

Your actual mortgage rate depends on your individual loan characteristics.

Before assuming you don't qualify, let's look at the whole picture

If another lender told you that your tax returns don't show enough income, that doesn't necessarily mean you can't purchase a home.

It may mean they evaluated you using only one type of mortgage.

At Premiere Capital Mortgage, we can look at the larger picture:

Your tax returns.

Your bank statements.

Your business history.

Your credit.

Your available down payment.

Your reserves.

The property you're purchasing.

And most importantly, the different loan programs that may be available.

Sometimes a traditional conventional or FHA loan is still the best solution.

Sometimes a bank-statement or other Non-QM program provides the better path.

The goal isn't to force you into a particular mortgage. It's to determine which legitimate financing strategy fits your circumstances.

If you're self-employed in Murrieta, Temecula, Riverside County or elsewhere in California, contact me before assuming your tax returns have taken homeownership off the table.

John F. Lawrence
Premiere Capital Mortgage
Murrieta, California
951-634-9284
PCMloans.net

This article is for educational purposes only and does not constitute a commitment to lend, an interest-rate quote, tax advice or a guarantee of financing. Loan programs, rates, fees, documentation requirements and underwriting guidelines are subject to change. Eligibility depends on the individual borrower, property, lender and applicable program requirements. Consult a qualified tax professional regarding tax matters.