Self-Employed Mortgages on Long Island

You can get a mortgage when you’re self-employed on Long Island. A conventional or FHA lender counts what your tax returns show after a few adjustments, not what you bill, and usually wants two years of history. If write-offs leave you short, I also offer bank statement and 1099 loans through lenders I work with.

Who counts as self-employed: business owners, 1099 and gig workers

Conventional and FHA loans treat you as self-employed if you own 25% or more of a business, even if it pays you on a W-2. For conventional loans, the rules I quote on this page are Fannie Mae’s.

Paid on a 1099 or doing gig work? The IRS generally treats you as self-employed, so a conventional or FHA lender reads your tax returns, not just your 1099s. It starts from what’s left on your Schedule C after expenses.

If what’s left is too thin, a 1099 loan can qualify you on your 1099s instead.

Travel nurse on a 1099? See my guide to mortgages for nurses.

Have a W-2 job and a side business? If your paycheck alone qualifies you and you’re not counting the side income, the lender doesn’t have to analyze the business on a conventional loan, even if your return shows a loss from it. To count the side income, it has to meet the self-employed rules below.

A lot of Long Islanders work for themselves. The Census Bureau’s 2024 figures show about 342,000 businesses with no paid employees in Nassau and Suffolk, including more than 25,000 in construction and more than 27,000 in health care. Most are self-employed people working as sole proprietors.

How long you need to be self-employed

Two years on your own is the norm for both conventional and FHA loans.

Less can work if you did the same kind of work before. Say you were an electrician on someone else’s payroll for years, then opened your own shop.

On a conventional loan, one full year of the shop on your latest signed returns can be enough, if you made at least as much on payroll as you now make from the shop. FHA wants at least a year on your own, plus two years before that in the same or related work.

How lenders calculate your income

For a sole proprietor, the underwriter starts with the net profit on your Schedule C and adjusts from there.

On conventional and FHA loans, the underwriter adds back some write-offs, like depreciation and business use of your home. On a conventional loan, one-time income that won’t repeat comes out.

For example, say your Schedule C shows $80,000 of net profit after $12,000 of depreciation on equipment. The underwriter adds the $12,000 back, for $92,000 that year, before other adjustments.

Then the underwriter compares both years, and a falling trend gets a hard look.

FHA uses the lower of your two-year average and your most recent year. So if last year was better, you get the average, not your best year.

If your income dropped more than 20% over those years, FHA sends the file to an underwriter to review by hand.

Own an S corp or a partnership?

Your K-1 income isn’t automatically money you took home. On a conventional loan, it counts if your K-1s show steady cash distributions at about that level, or if the business has enough cash to pay it out.

Documents for a self-employed mortgage

Most self-employed mortgages need two years of tax returns. Here’s my checklist in short:

• Personal tax returns for two years, signed, with every schedule, or IRS transcripts for the same years.
• Business tax returns for two years if you own 25% or more of a partnership, S corp or corporation, unless a waiver below applies.
• A year-to-date profit and loss statement, sometimes. A conventional loan usually doesn’t require one.
• On an FHA loan, a year-to-date profit and loss statement from April on, if your tax year ends in December.

Filing on extension? Tell me early.

Apply before April 15 and a conventional loan can still close on your older return through mid-October. Closing in July or later? The lender also needs your extension or proof of an estimated tax payment.

Apply on April 15 or later and a conventional loan needs the new return, extension or not.

When fewer returns work

Had the same business for five years or more? On a conventional loan, one year of personal and business returns can be enough if you’ve owned 25% or more of it all five years.

With that history, the lender can also skip your business returns if your last two personal returns show rising income and your down payment, closing costs and reserves come from personal funds.

Business funds and business debts

On a conventional loan, you may be able to use business funds for the down payment, closing costs and reserves if you’re listed as an owner on the account. If you also qualify on that business’s income, the lender has to confirm taking the money out won’t hurt the business.

A loan in your name that the business pays, like an SBA loan, can be left out of your debt-to-income ratio. The business has to show it made the payments on time.

Returns come up short? Bank statement and 1099 loans

Some self-employed people write off so much that their returns don’t support the loan they can afford. If you can qualify for a conventional or FHA loan, start there. That’s usually the lower-cost route.

If you can’t, I also offer bank statement and 1099 loans through lenders I work with. Not every lender offers these here, and each sets its own terms.

A bank statement loan usually looks at 12 to 24 months of personal or business statements instead of your tax returns. The lender counts only part of your business deposits, to allow for expenses. Deposits that aren’t income, like borrowed money, don’t count.

A 1099 loan qualifies you on your 1099 forms instead of your tax returns, usually for the last one or two years. Some lenders count only part of the 1099 income, to allow for expenses.

These aren’t conventional, FHA or VA loans, and you may hear them called non-QM. They usually cost more than a conventional loan and need a bigger down payment. Your income is still verified, just from bank records or 1099s instead of tax returns.

Not sure which loan fits? Call or text me at 631-250-6930 and tell me how you’re paid.

Dealing with credit issues too? See my guide to getting a mortgage with low credit.

Self-employed in New York City or Westchester?

The income rules are the same from Babylon to the Bronx, and so is the 2026 conforming limit (see my New York loan limits). Buying a co-op? Not every bank statement or 1099 lender finances them, and the maintenance counts in your debt-to-income ratio (see my co-op guide).

Buying a rental? Look at DSCR

A DSCR (debt service coverage ratio) loan is judged mainly on the property’s rent against the full monthly payment, not on your tax returns. DSCR loans are made for investment property, not the home you live in.

Planning to buy? Talk to me before you file

If you might buy in the next year or two, call me before your return is final. Every dollar you write off is a dollar of income that conventional and FHA lenders can’t count, unless it’s one of the add-backs above. I don’t give tax advice, and the write-off may still be worth it, but know what it costs you first.

Then get pre-approved. Pre-approval takes only a soft credit check, so it won’t affect your credit score. Call or text me at 631-250-6930, or send me a message.

To compare programs, see my pages on FHA loans, conventional and jumbo loans and VA loans, or all my loan programs.

Buying your first home? My first-time buyer guide has a section for self-employed buyers, and my page on down payment assistance covers private programs that can help.

Frequently asked questions