If you run your own business in Michigan, you already know the problem: your accountant did exactly what you pay them to do, your taxable income came out small, and now a bank's online portal says you can't afford the house you can obviously afford. This page walks through every way a self-employed borrower can qualify, starting with the one most people skip, which is finding out whether a regular conventional loan still works once the right deductions are added back.
Get My Quote → Call (810) 819-8686Jump to the one that brought you here. They're in the order I'd walk through them with you, because the least expensive loan that works is usually the first one worth checking.
This is the conversation most self-employed borrowers never get, and it's the one that saves them the most money. Conventional, FHA, VA and USDA loans all work for self-employed people. They qualify you on your tax returns, usually the last two years, and the underwriter doesn't simply take the bottom line at face value. Certain deductions are added back to your income, and for a lot of business owners that closes most or all of the gap.
A few details decide whether the agency path works for you. You're treated as self-employed once you own 25 percent or more of a business. Conventional loans can sometimes use just one year of returns when the business has been operating for five years or more and you've owned at least 25 percent of it that whole time, and business returns can sometimes be skipped when you've been in the same business for five years or more, your income has been rising, and you're using personal rather than business funds to close. When income is declining from one year to the next, the underwriter has to look hard at whether it's stable, and that's often the point where a non-QM program becomes the better fit.
There's also the household question. If someone applying with you earns W-2 income, their paycheck may be enough to carry the loan on its own or together with yours, and that usually means a conventional loan rather than anything specialized. I'll always check the conventional path first, because it's generally the least expensive loan that works, and you can see how those loans work on my conventional loan page.
On an agency loan, your qualifying income starts with what's on your returns, but it doesn't end there. Fannie Mae's self-employed income analysis adds back several deductions that reduced your taxable income without actually costing you cash that year. Here's how the most common write-offs are treated:
| Deduction on your return | How agency underwriting usually treats it |
|---|---|
| Depreciation | Added back to your income, since it's an accounting deduction rather than cash spent that year |
| Depletion and amortization | Added back for the same reason |
| Business use of your home | Added back |
| One-time casualty losses | Added back when they're truly non-recurring |
| Vehicle, standard mileage | The depreciation portion of the mileage deduction can be added back |
| Everyday business expenses | Stay deducted, because they're real costs of running the business |
Based on Fannie Mae's self-employed income analysis (Form 1084 and Selling Guide B3-3.6-03). FHA, VA, Freddie Mac and individual lenders apply their own versions of these rules.
If your income still comes up short after the add-backs, that's usually a sign your deductions are doing their job for tax purposes, not a sign you can't afford the home. That gap is exactly what the alternative-documentation programs below were built to close, and if you'd like me to run the add-back math on your last two returns before you decide anything, that's a normal first step.
A bank statement loan is a non-QM mortgage that documents your income with 12 or 24 months of bank statements instead of tax returns. It's still a real mortgage, with an appraisal, title work, a fixed-rate option and a full underwrite. The difference is which records prove your income.
If business income flows into a personal account, lenders generally count your eligible deposits, after backing out transfers between your own accounts, refunds, loan proceeds and other one-time deposits.
If you're qualifying on business account deposits, the lender applies an expense factor to account for what it costs to run the business. That's either a standard percentage, a figure based on your type of business, or a lower ratio documented by your CPA or tax preparer.
Twelve months helps when this year is stronger than last. Twenty-four months smooths out a lumpy year. Which one qualifies you for more is something you and I work out with your actual statements.
Most programs also want to see that the business is real and has been operating for a while, usually two years, confirmed by your CPA or tax preparer, a business license or a similar record. Every lender draws these lines a little differently, which is exactly why brokering matters here: the same statements can produce a noticeably different qualifying income depending on whose guidelines they're run through, and I run them through more than one.
Often, yes. Independent contractors, commission earners, real estate agents, consultants and gig workers who get paid on a 1099 can use a 1099-only program, which qualifies you on one or two years of 1099s plus proof of what you've earned so far this year. Lenders typically apply a modest expense factor to the gross amount rather than using the net figure from your Schedule C.
If your 1099 income is steady and your deductions are heavy, this can be a cleaner fit than a bank statement loan, because there's less to reconcile. If your income comes from a mix of 1099s and other sources, a bank statement program may capture more of it. It's a quick comparison to make once I can see both.
Yes, with the right preparer. P&L-only programs qualify you on a 12- or 24-month profit and loss statement prepared by a CPA, an enrolled agent or another credentialed tax preparer, sometimes supported by a few months of bank statements. For an established business with a professional keeping the books, it can be the lightest documentation path available, since the P&L already reflects your real expenses.
The one thing to know going in is that the preparer's credentials matter. A P&L you put together yourself generally won't qualify on its own, so if you're considering this route, it's worth a quick conversation with your accountant before we start.
For some borrowers, yes. Asset depletion programs, sometimes called asset utilization, turn savings, investments or retirement accounts into a monthly qualifying income by dividing the eligible balance over a set number of months. They fit people who have sold a business, stepped back from running one, or simply hold more in assets than their tax returns show in income. Fannie Mae and Freddie Mac each have a more limited version with their own asset and eligibility rules, while non-QM programs typically accept a wider range of assets.
You don't spend the money down to qualify. After whatever you'll use for closing and reserves is set aside, the remaining assets simply demonstrate your ability to repay, and they stay yours. If you're buying a rental rather than a home to live in, a DSCR loan qualifies on the property's rental income instead of your personal income, since it's a business-purpose loan, and that page walks through how it works in Michigan.
This is one of the most common calls I get, and it's more workable than people expect. Two years of self-employment is the usual standard, but it isn't always the minimum. Here's how the main programs handle a newer business:
At least 12 months of self-employment can work when your recent returns show a full year from the current business and you have a prior history in the same or a similar line of work at the same or higher income. Freddie Mac also looks for a combined two-year history across the business and the job before it.
One to two years of self-employment is acceptable when you were previously employed in the same or a related line of work for at least two years.
Less than two years can be considered when there's previous related employment or specialized training behind it, although under a year rarely works.
Some bank statement and 1099 programs accept one year of self-employment when you have prior experience in the same field.
The pattern is the same everywhere: a new business that continues the work you were already doing is treated very differently from a brand-new venture in a field you've never worked in. If you went from a W-2 job to doing the same work on your own, tell me that on the first call, because it's usually the detail that makes the file work.
There are trade-offs, and you should hear them before you apply rather than after.
Non-QM loans are generally priced above conventional loans, and most ask for a larger down payment. How much more depends on your credit, the property and the program, and it's a real cost, which is why I check the agency path first.
On a home you'll live in, federal ability-to-repay rules still require the lender to verify that you can repay using reliable third-party records. You document your income differently, but you still document it.
Some borrowers use a non-QM loan to buy the right house now and refinance into a conventional loan once two strong years of returns are on file. That only works if the numbers support it, so we plan for it rather than count on it.
On a home you'll live in, including a second home, federal rules generally prohibit a prepayment penalty on a non-QM loan. Investment property loans are treated differently, and I'll tell you up front whether any loan I quote carries one.
You don't need anything to start the conversation, and there's no credit pull to have it. When we're ready to compare paths, this is what makes it fast:
Your last two years of tax returns, personal and business, even if you think they won't qualify you. They tell us whether the conventional path is open.
Twelve to twenty-four months of bank statements for the accounts your business income runs through.
Your 1099s, if that's how you're paid, plus something showing this year's earnings so far.
Your CPA or tax preparer's contact information, since many programs verify the business through them.
A short list of any large one-time deposits, such as an asset sale or a transfer from savings, so they can be explained up front.
Statements for savings and retirement accounts, which matter for reserves and for asset-based options.
From there, the process is simple. You fill out the form, I call you within four hours to talk through your situation, and if the numbers work I get you a pre-approval letter based on a wholesale lender's review so you can make offers with confidence. Once you're under contract, I submit your file to the lender's underwriters, coordinate the appraisal and title, and you hear from me every week until closing.
Your offer looks the same to a seller. A preapproval built on bank statements or a profit and loss is still a preapproval letter, and the listing agent sees the same document any other buyer hands over. What changes is the homework, and we do that before you tour, not after you've found the house. Start with a real preapproval.
Using business money for the down payment. It can work, but lenders may ask for a letter from your CPA or a review of the business's cash flow showing the withdrawal won't hurt the company. Move the money early into an account you can document, and keep the trail clean.
Keep the business steady until closing. Lenders commonly confirm the business is still active shortly before closing. Hold off on changing how you're paid, restructuring the company, or taking on new business debt until you have the keys.
Higher-priced homes. Bank statement and asset-based programs exist at larger loan amounts too. If you're shopping above the conforming limit, see jumbo loans in Michigan.
Tell me how you're paid, how long you've been on your own, and what you're hoping to buy or refinance. I'll tell you which path is actually open to you, conventional first and non-QM only if it's the better fit, with the numbers side by side and no credit pull to have the conversation.
Get My 4-Hour Callback → Call (810) 819-8686Buying a rental? See DSCR loans, or browse every Michigan loan program we broker.
Sources: Fannie Mae Selling Guide B3-3.5-01, B3-3.6-01, B3-3.6-03, B3-3.7-04 and B3-3.4-06 (sections renumbered by Announcement SEL-2026-02) and Form 1084; Freddie Mac Seller/Servicer Guide Section 5304.1 and Bulletin 2024-10; HUD Handbook 4000.1; VA Lender's Handbook (M26-7), Chapter 4; USDA HB-1-3555, Chapter 9; 12 CFR 1026.43 (ability-to-repay and prepayment penalty rules). Non-QM program descriptions reflect typical wholesale lender guidelines, which vary by lender and change over time.
About non-QM and alternative-documentation loans. Bank statement, 1099, profit and loss, asset depletion and DSCR programs are non-qualified mortgage products offered by third-party wholesale lenders. Program availability, documentation requirements, down payment, pricing and terms vary by lender, credit profile, property and loan purpose, and change without notice. All loans are subject to credit approval, underwriting, property appraisal and investor approval, and not all applicants will qualify. Nothing on this page is tax advice; consult a qualified tax professional about your situation. McKenney Home Lending, LLC is a licensed mortgage broker and brokers loans to wholesale lending partners; it is not a lender.
