Can You Get a Self-Employed Mortgage With Under Two Years of Returns?

The Quick Read: Yes, usually, but not through the standard agency route: borrowers can often qualify on documented income under a bank statement program, or on a rental’s own income when buying an investment property, subject to lender guidelines and each file’s underwriting review. The two-year habit comes from agency underwriting. It is a guideline with narrow exceptions, not a wall for every loan type.

• A bank statement program typically looks at 12 months of business or personal statements, not traditional personal-income documentation.
• On a primary residence, select lenders in Lendmire’s network go up to 90% LTV on a purchase or rate-term refinance.
• Buying a rental? A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines.
• Owner-occupied files and rental files follow different disclosure rules, so occupancy matters from day one.
• Under 12 months in business is the hardest case on every route.

Short Answer: It Depends on the Loan Type

Two years of returns is the standard for agency (conventional) loans. Agency loans are the ones sold to the big government-backed mortgage buyers. Those lenders want a history of net income, and they average it.

Bank statement programs ask a different question. They want to know what actually moves through your account each month. If the deposits are steady, the file can work even when your tax history is short.

Rental purchases add a third path. A DSCR loan, short for debt service coverage ratio, divides the property’s rent by its full monthly obligation. Your personal return history is not the test.

So the real question is not whether you have two years. It is which loan type fits your property, your occupancy plan, and your paperwork.

What Counts as Self-Employed Here?

Lenders treat you as self-employed if you own a meaningful share of a business, work as a 1099 contractor, or run a sole proprietorship. A common marker is 25% ownership. If you left a W-2 job last year to go independent, you are in this group.

“Two-year history” means two tax years of that income on your returns. A borrower who started mid-year may have one partial year and one full year. Lenders read those differently, which is why a short history is not an automatic no.

The Routes When You Have Under Two Years

Here is how the main options compare. Each one answers the same problem in a different way.

Most files we place land in the bank statement row or the DSCR row. A few borrowers wait a few months instead, and that is sometimes the smarter move.

How a Bank Statement Loan Reads Your Deposits

A bank statement loan is reviewed on documented income under the applicable program, subject to lender guidelines. The lender takes 12 months of business or personal statements. It averages the deposits. Then it applies an expense factor to estimate what you actually keep.

That expense factor varies by lender. Some use a fixed ratio. Others accept a ratio prepared by your accountant, which can help if your real costs are low. Across the network, the strongest files show regular deposits, clean separation between business and personal money, and no large unexplained transfers.

Here is a hypothetical. Picture a consultant who left a salaried job eleven months ago. Her tax return shows a short year with heavy deductions, so agency income looks thin. Her business account shows steady client deposits every month. The lender averages those deposits, applies its expense factor, and qualifies her on the result.

The leverage works like this on select programs:

• Primary residence, purchase or rate-term refinance: up to 90% LTV, with the top of that range going to stronger files.
• Primary residence using an asset-depletion alternative: up to about 80% LTV.
• Owner-occupied cash-out, primary or second home: up to 80% LTV with a fixed expense ratio, or 75% with an accountant-prepared ratio.
• Investment property cash-out: tops out around 75% LTV.
• Investment property purchase on bank statement documentation: varies by lender.

LTV means loan-to-value, the loan amount as a percentage of the property’s value. Loan sizes typically run from $125,000 to $3,500,000. Reserves, which are savings left after closing, commonly run around six months of the housing payment. Every file is underwritten individually, so treat these as typical ranges, not promises.

What the Agency Guide Says About a Short History

Agency underwriting does have exceptions, but they are narrow. Fannie Mae’s announcement on self-employment history says that when you have under two years, your signed returns must show at least 12 months of self-employment income from the current business.

The same announcement describes the relief for established owners. One year of returns can be enough when the business has existed five years and the borrower has held at least 25% ownership for the last five consecutive years. That helps a long-running owner with a strong latest year. It does nothing for a brand-new business.

The Fannie Mae self-employed borrower guide lists what lenders weigh. Those include income stability, the nature and location of the business, demand for its product or service, and its financial strength. The guide’s general rule is a two-year history of prior earnings.

Two takeaways follow. First, two years is not a law. It is an agency standard with documented exceptions. Second, the exceptions are narrow, which is why many new owners look at bank statement programs instead.

Which Route Fits You?

Match your situation to the most likely path:

• Former W-2 worker, now independent for 12 to 18 months, buying a home to live in. A bank statement program is usually the first look, because it skips the thin return history.
• Owner with a business over five years old and a strong latest year. The agency one-year exception may apply, so it is worth comparing against a bank statement quote.
• Owner who writes off heavily. Returns show net income after deductions, so agency math can look weak. Bank statements measure deposits instead.
• Freelancer with under 12 months in business. This is the hardest case. Waiting a few months, adding a co-borrower, or using assets may do more than hunting for a loophole.
• Investor buying a rental. A DSCR loan is usually the cleaner fit, since the property’s rent is the main test.
• Borrower with large liquid savings but irregular income. The asset-depletion alternative qualifies from liquid assets, up to about 80% LTV on a primary residence.

How Your First-Year Return Gets Read

Underwriters read net income, not revenue. A first-year return with large deductions can show a low number even when your business is doing well. A partial first year can also drag the average, since lenders may spread income over the months you actually worked.

That is the core trade-off for new owners. Aggressive deductions lower your reported income, which hurts on agency loans. On a bank statement or DSCR file, the return is not the main test. Tax treatment can depend on how the funds are used and how the property is held; borrowers should keep clear records and speak with a qualified tax professional before relying on any deduction.

Buying a Rental? Occupancy Changes Everything

DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The lender checks whether the rent covers the full monthly payment, plus your credit, liquid assets, and reserves. That is still underwriting, just not a review of your personal income.

If you want the full picture, Lendmire’s complete DSCR loans guide walks through how coverage is calculated. A coverage ratio of 1.00 means rent equals the payment. Select lenders in the network also offer programs below 1.00, but leverage and terms adjust when coverage is thinner.

Because the property carries the file, a short self-employment history is not the qualifying test. Lender credit, reserve, and experience rules still apply, so a new owner is not automatically approved. One more point: if the property does not cover its payment, DSCR stops working. A bank statement program is the usual fallback.

Easy qualification also invites over-leverage. Business Insider, via Yahoo Finance, warns investors to stress-test rents with conservative assumptions that include insurance, maintenance, and vacancy. That is good practice on any rental file.

Disclosure Rules Depend on Occupancy

An owner-occupied file, whether a primary residence or second home, is a consumer mortgage, so TRID disclosures apply. A bank statement loan on a non-owner-occupied rental, including a short-term rental, is business-purpose and exempt from TRID. Pick the right path for the property you are actually buying, and do not mix the two.

Non-QM loans still have to show repayment ability. Under the federal ability-to-repay rule, lenders must consider eight underwriting factors and may use a range of documents. A qualified mortgage gets a presumption of compliance, while non-QM loans do not, so the lender must be able to show it assessed repayment. Short version: no traditional personal-income documentation does not mean no review.

Lendmire’s consumer mortgage licensing covers 16 states, so availability for owner-occupied files depends on where the property sits.

Key Terms Defined

Non-QM: A mortgage that falls outside the standard qualified-mortgage box, often because income is documented differently.

Bank statement loan: A mortgage that is reviewed on documented income from 12 months of statements, subject to lender guidelines.

LTV: Loan-to-value, the loan amount as a percentage of the property’s value.

Reserves: Liquid savings you hold after closing, commonly around six months of the housing payment on these programs.

DSCR: Debt service coverage ratio, the property’s rent divided by its full monthly obligation.

Asset depletion: A way to qualify from liquid assets instead of regular income.

What to Do Before You Apply

Preparation beats workarounds. Here is a practical plan.

Twelve months out. Open a separate business account if you have not. Run all client money through it. Keep personal spending out of it.

Six months out. Gather statements and see how the deposit pattern looks. Large one-time transfers need explanations, so note them now. Ask your accountant whether an expense ratio letter makes sense.

Three months out. Check your credit, keep reserves untouched, and avoid new debt. Talk to a broker before you file or restructure anything, so the paperwork matches the program you will use.

Common reasons files stall include mixed personal and business deposits, unexplained transfers, thin reserves, and a property that does not cover its payment on a rental file. Most are fixable with a few months of cleaner records.

Next Step

For a closer look at how the lender reads a short history, see Lendmire’s guide How to Pick a Self-Employed Mortgage Under Two Years in Business.

For current guidelines and terms, see Lendmire’s self-employed mortgage programs page.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage broker licensed for consumer lending in 16 states. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. Fannie Mae Selling Guide Announcement SEL-2023-09

2. Fannie Mae Selling Guide: Underwriting Factors and Documentation for a Self-Employed Borrower

3. Business Insider via Yahoo Finance