Self-Employed Mortgages in California: Every Way to Qualify

I’m Michael DiVita — DRE #01372066 | NMLS #241655, DiVita Home Finance (DRE #01818285 | NMLS #323700), Tiburon, CA. I’ve been in California mortgage lending since 2000 and founded DiVita Home Finance in 2007. I’m known as a creative mortgage broker: when a bank says no, I find the lender and the loan structure that can say yes. Self-employed borrowers are some of my most common clients — the gap between what you earn and what your tax return shows is a problem I solve every day. Call (800) 239-1103.

Self-employed borrowers in California can qualify for a mortgage with tax returns (conventional), or without them using bank statements, a CPA-prepared P&L, 1099s, assets, or — for rentals — the property’s rent. The right option depends on how closely your tax returns reflect what you actually earn.

If your accountant has done a good job, your tax return shows a fraction of what your business really produces. Conventional lenders have to use that number. That’s why so many business owners, contractors, agents and consultants get turned down by banks — and why I spend so much of my time on self-employed files. With access to 40+ wholesale lenders, including non-QM and portfolio lenders, I can usually find a documented, legitimate way to show what you can really afford.

Why Self-Employed Borrowers Get Denied

For a conventional (Fannie Mae or Freddie Mac) loan, lenders generally average your net self-employment income from the last two years of tax returns — after all deductions. Some borrowers can use one year of returns if the business has existed for at least five years, and borrowers with less than two years of self-employment may qualify with 12 months if they previously earned comparable income in the same field.

Every legitimate write-off — depreciation, vehicle, home office, retirement contributions, S-corp salary planning — lowers that number. If your business grosses $400,000 but your return shows $90,000, a conventional lender qualifies you on $90,000. A declining year or a loss year makes it worse, because the lender averages or may even discount the income.

Your Options at a Glance

Non-QM programs are priced above conventional loans and usually require larger down payments. Exact credit, down payment and loan-size rules vary by lender and change often, so I quote them for your file rather than posting numbers that go stale.

Bank Statement Loans

The most common non-QM option for business owners. The lender averages 12 or 24 months of deposits; business-account deposits are reduced by an expense factor (often 50%, or a lower CPA-supported ratio), while personal-account programs often count 100% of eligible deposits.

Example: $25,000 a month in average business deposits × 50% = $12,500 a month, or $150,000 a year of qualifying income. Full detail, including 12- vs. 24-month programs, in my bank statement loan guide, and a real declined-to-approved case study.

P&L Loans

If a CPA or tax professional keeps your books, a P&L loan qualifies you on the net income from a signed 12- or 24-month profit and loss statement instead of tax returns. Lenders check that the P&L is reasonable for your industry, and some also ask for a few months of bank statements to support it.

Bank statement or P&L? If your business deposits $300,000 a year and your P&L shows $120,000 net, the 50% bank statement calculation ($150,000) wins. If the P&L shows $180,000 net, the P&L wins. I run both before recommending one.

1099 Loans

For independent contractors, real estate agents, loan officers, consultants, travel nurses and locum physicians who are paid on 1099s. The lender uses your gross 1099 earnings — commonly 90% of them, sometimes 100% — instead of the Schedule C net after deductions.

Example: $220,000 of 1099 income over two years averages $110,000 a year. At 90%, that’s $99,000 a year, or $8,250 a month of qualifying income. At a 43% debt-to-income ratio, that supports about $3,547 a month in total housing and other debt payments. A conventional lender using a Schedule C net of, say, $60,000 would qualify you on far less.

If you have both W-2 and 1099 income, lenders can often combine them. If your 1099 income is falling, a bank statement program may produce a stronger number.

Asset Depletion

For borrowers with significant savings and investments but modest or irregular income. The lender takes eligible assets (after the down payment, closing costs and required reserves, with some accounts discounted), and divides by a set number of months to create qualifying income. The divisor varies by program. Example: $2.4 million of eligible assets ÷ 360 months = about $6,667 a month. See asset depletion mortgages.

DSCR Loans for Investment Properties

If you’re buying a rental, a DSCR loan qualifies on the property’s rent versus its payment (principal, interest, taxes, insurance and HOA). Your personal income and tax returns aren’t used for qualifying. See DSCR loans.

Situations I See Every Week

“My accountant says I can’t get a mortgage.”

Your accountant is probably right about a conventional loan — and doing their job by minimizing your taxes. That doesn’t rule out bank statement, P&L or 1099 programs, which don’t use your taxable income.

“I’ve only been self-employed for a year.”

Conventional loans may allow 12 months of self-employment if you previously earned similar income in the same field. Some non-QM programs also accept shorter histories with prior experience in the same line of work.

“I write off everything.”

That’s exactly who bank statement and 1099 loans are built for. The trade-off is a higher rate and larger down payment — many borrowers refinance into a conventional loan later once their tax returns support it.

Real estate agents, restaurant owners, tech contractors, gig workers

Commission earners usually fit 1099 programs; restaurant and retail owners with high deposits and thin margins usually fit bank statement programs; tech contractors moving from W-2 to 1099 need a careful look at history in the same field; gig workers need consistent, documented earnings over time. Physicians and dentists have extra options — see physician loans.

Entertainment and creative professionals in Los Angeles

Writers, directors, producers and crew often have 1099s from several production companies, gaps between projects and large deductions. Averaging 24 months of deposits or 1099 income usually smooths out the gaps; a 12-month program can work better after a breakout year.

Marin and Bay Area buyers

The 2026 conforming limit in Marin, San Francisco and most Bay Area counties is $1,249,125, so many self-employed purchases here are jumbo-sized. Bank statement and P&L programs are available in jumbo amounts, usually with larger down payments and reserve requirements than smaller loans. See Marin mortgages and jumbo loans.

Documents to Gather

• Conventional: personal (and, if applicable, business) tax returns, a year-to-date P&L, bank statements, business license or CPA letter.
• Bank statement: 12 or 24 months of statements (all pages), proof of business, explanations for large deposits.
• P&L: signed P&L from a CPA or tax professional, their license information, proof of business.
• 1099: 1099 forms for the qualifying period, often a year-to-date earnings statement.
• Asset depletion: recent statements for every account being used.

Tips Before You Apply

• Talk to me before your CPA files your next return if you plan to buy soon — the timing of deductions can matter.
• Keep business and personal funds separate and avoid unexplained large deposits.
• Don’t open new credit or change your business structure mid-process.
• Plan your exit: many self-employed buyers use non-QM to buy, then refinance into a conventional loan once their returns support it.

You Don’t Have to Pick Just One Program

Most loan officers think a self-employed borrower has to choose one way to qualify. With the right lender, you can stack them. On a recent file I combined 12 months of business bank statements, W-2 income from a second job and asset depletion, with no tax returns, and got my client pre-approved for a $1,750,000 purchase. Here’s how.

Frequently Asked Questions

Can I get a mortgage if I’ve been self-employed for only one year?

Possibly. Conventional loans can allow 12 months of self-employment if you have a history of comparable income in the same or a similar field. Some non-QM bank statement programs also accept shorter histories with prior experience.

Do my tax write-offs hurt me?

On a conventional loan, yes — lenders use your net income after deductions. On bank statement, P&L and 1099 loans, your write-offs don’t reduce qualifying income the same way, because those programs don’t use your taxable income.

How do lenders calculate self-employed income?

Conventional lenders generally average net income from the last two years of tax returns. Bank statement lenders average deposits and apply an expense factor to business accounts. 1099 lenders commonly use 90% of gross 1099 earnings. P&L lenders use the net income on a signed P&L.

How much do I need to put down?

Conventional loans can go as low as 3–5% down for eligible borrowers. Non-QM programs usually require more — often 10–20% for a primary residence — and investment properties and very large loans require more still.

Can I qualify if my business showed a loss?

A loss year makes conventional qualifying hard because lenders average or discount declining income. Bank statement and asset-based programs don’t use your tax return, so a paper loss matters less — deposits and assets do.

Are self-employed mortgage rates higher?

Conventional loans for self-employed borrowers are priced like any other conventional loan. Non-QM programs carry higher rates that depend on credit, down payment, loan size and documentation type.

Related Resources

• Bank Statement Loans in California
• Non-QM Mortgages in California
• Asset Depletion Mortgages
• DSCR Loans
• Bank Statement HELOC
• Physician Loans
• Mortgage Denied? What to Do Next
• Debt-to-Income Ratio Explained