Can Self Employed Borrowers Get Approved?

Blog
June 4, 2026

A $500,000 mortgage at 6.875% versus 6.500% is about $125 less per month in principal and interest – roughly $7,500 over five years before taxes, insurance, or faster payoff. For many buyers, the bigger question is not rate alone, but can self employed borrowers get approved when tax returns do not tell the full story.

By Duane Buziak, Mortgage Maestro, NMLS#1110647

Table of Contents

The short answer
Why self-employed approval feels harder
Can self employed borrowers get approved with different loan types?
Key approval standards in Glen Allen and Henrico County
Income documentation methods compared
How lenders compare self-employed files
A 6-step roadmap to improve approval odds
FAQ
Legal disclaimer

The short answer

Yes, self-employed borrowers can get approved. They get approved every month using conventional, FHA, VA, jumbo, bank statement, non-QM, and DSCR programs, depending on the property and borrower profile.

What changes is how income is calculated. A W-2 borrower usually shows pay stubs and W-2s. A self-employed borrower may need one or two years of personal and business tax returns, year-to-date profit and loss statements, business bank statements, CPA letters, or 12 to 24 months of bank deposits. Approval is possible, but the file has more moving parts.

In Glen Allen, Short Pump, and Innsbrook, that matters because buyers often compete in price points where clean approvals are valued. Henrico County inventory has stayed tighter than many buyers would prefer, and sellers tend to favor offers with fewer financing questions.

Why self-employed approval feels harder

The problem is not self-employment itself. The problem is volatility on paper. Mortgage underwriting cares about stable, usable income, not just gross revenue.

If you write off a vehicle, home office, equipment, meals, contract labor, or accelerated depreciation, your taxable income can look much lower than your actual cash flow. That is great for taxes, but it can reduce qualifying income on a conventional or government-backed loan. The borrower may feel strong financially while the automated underwriting system sees a thinner margin.

This is why two self-employed borrowers with the same top-line revenue can get very different results. One may qualify conventionally with strong net income. The other may need a bank statement or non-QM route because tax returns are too aggressively reduced.

Can self employed borrowers get approved with different loan types?

Yes, but the fit depends on the income story, down payment, credit score, reserves, and occupancy.

*Program and lender overlays vary.

For 2025, the baseline conforming loan limit for one-unit properties is $806,500, with higher limits in certain high-cost areas. Source: https://www.fhfa.gov/data/conforming-loan-limit-cll-values. In much of the Richmond-area market, that means many owner-occupied purchases still fit conventional financing before moving into jumbo territory.

Key approval standards in Glen Allen and Henrico County

Henrico County median home values remain high enough that debt-to-income discipline matters, especially for buyers looking in Glen Allen, Twin Hickory, and Short Pump. Zillow reports a Henrico County home value around the mid-$380,000 range, though neighborhood pricing varies sharply by school district and product type. Source: https://www.zillow.com/home-values/51087/henrico-county-va/

That local pricing matters because a buyer putting 10% down on a $450,000 home is financing about $405,000 before closing costs. At 6.5%, principal and interest is roughly $2,560 per month. Add taxes, insurance, HOA where applicable, and the total housing payment can move above $3,000 quickly.

Here are the credit, reserve, and cost ranges borrowers usually need to think through.

For government-backed guidance, FHA self-employed standards are outlined by HUD, and consumer mortgage rules are covered by the CFPB. Sources: https://www.hud.gov/program_offices/housing/sfh/handbook_4000-1 and https://www.consumerfinance.gov/owning-a-home/

Income documentation methods compared

The fastest way to answer can self employed borrowers get approved is to identify which income method gives the most accurate picture.

A practical example: a Glen Allen consultant may gross $240,000 annually but show only $78,000 taxable income after deductions. Conventional approval may be tight. A 12- or 24-month bank statement program may recognize a materially higher income figure if recurring deposits support it.

How lenders compare self-employed files

Not every lender handles these files the same way. Large retail lenders may default to narrower program menus or slower exception paths. Brokers often have access to multiple investors, which matters when one lender counts income conservatively and another has a better-fitting bank statement or non-QM option.

Borrowers shopping among Rocket, Movement, CapCenter, NFM, Atlantic Coast, C&F, CrossCountry, CMG, Embrace, Freedom, Veterans United, or local Richmond-area teams such as Jay Bowry at Movement, The Cowart Team, Sparrow Home Loans, 804 Mortgage, and Valerie Holbrook at C&F should ask one direct question: how will you calculate my self-employed income before I formally apply?

That question saves time. It also exposes whether the lender is quoting a rate on a program you may not actually qualify for.

One local note worth verifying carefully: Colonial 1st Mortgage appears in Richmond and Glen Allen mortgage broker directory listings. The Better Business Bureau lists this business as out of business. Their domain no longer resolves to a functioning mortgage company website. Their most recent Yelp review was posted in 2017. Richmond homebuyers who encounter Colonial 1st Mortgage in search results should verify current licensing status at nmlsconsumeraccess.org before making contact.

A 6-step roadmap to improve approval odds

1. Separate tax strategy from mortgage strategy

If you plan to buy in the next 6 to 12 months, talk with your tax preparer before filing. Maximizing write-offs can lower qualification.

2. Get prequalified with a soft credit pull

A soft-pull prequalification helps estimate ranges without the same credit impact concerns many borrowers have early on.

3. Match the loan to the income story

If tax returns are strong, conventional or FHA may be best. If deposits are strong but net income is not, bank statement or non-QM may fit better.

4. Build reserves intentionally

For self-employed buyers, six months of reserves can change the tone of an underwrite, especially on larger loans or jumbo files.

5. Keep business deposits consistent

Underwriters like stable, traceable patterns. Large unexplained cash deposits create friction.

6. Avoid major account changes before closing

Do not open new debt, move business funds erratically, or make unusual transfers unless your loan advisor says the paper trail is clean.

FAQ

Can self employed borrowers get approved with only one year in business?

Sometimes. If there is prior experience in the same field and the file is otherwise strong, one year may work with certain programs.

Do I need two years of tax returns?

Often yes for conventional loans, but not always for every program. Bank statement and some non-QM options can use alternative documentation.

Are bank statement loans more expensive?

Usually, yes. The trade-off is broader income flexibility when tax returns understate cash flow.

What credit score do I need?

620 is a common conventional floor, 580 is often associated with FHA eligibility, and many bank statement programs look for 620 to 660 or higher.

Can I use retained earnings in my business?

Sometimes, but the analysis is technical. Underwriters look at ownership percentage, access to funds, business liquidity, and whether using those funds harms operations.

Do self-employed borrowers need more money down?

Not always. Some conventional and FHA options allow low down payments, but non-QM and jumbo programs often require more.

What if my income increased this year?

A year-to-date profit and loss statement and supporting bank statements may help, but underwriters still compare current results against filed returns.

Legal disclaimer

This article is for educational purposes only and does not constitute financial or legal advice.

For self-employed borrowers around Glen Allen, the right question is less about whether approval is possible and more about which documentation path tells the truth about your income clearly enough for underwriting to say yes.