How to Get a Mortgage in Michigan When You’re Self-Employed

The Quick Read: Self-employed borrowers get approved by choosing the documentation path that matches how their income actually shows up, whether that is traditional personal-income documentation or twelve months of bank statements. A tax return shows income after write-offs, while bank statements show cash that actually moved through your accounts. The path you pick often decides whether the loan works at all.

• Tax-return loans typically want a two-year history and use net income after deductions.
• Bank-statement loans qualify on documented income under the applicable program, subject to lender guidelines.
• Select lenders in Lendmire’s wholesale network go up to 90% LTV on a primary-residence purchase or rate-term refinance.
• Owner-occupied cash-out tops out at 80% LTV, and investment-property cash-out at about 75%.
• Asset depletion is a third path for borrowers with strong liquid assets.
• Reserves commonly run around six months of the housing payment.

Michigan borrowers face the same underwriting rules as everyone else. A plumber in Grand Rapids, a freelance designer in Ann Arbor, and a short-term rental host up north all hit the same wall. Their income is real, but their returns say less than their bank accounts do.

Who Counts as Self-Employed for a Mortgage?

Lenders treat you as self-employed when you own a meaningful share of a business, work as a freelancer, or earn mostly 1099 income. Sole proprietors filing Schedule C, owners of S-corps and LLCs, and partners all land in this group. Gig workers do too.

The category matters because lenders can’t point to a pay stub. They have to build a monthly income figure from records, and each business structure leaves a different trail. A sole proprietor’s profit shows on one schedule. An S-corp owner shows wages plus distributions. A partner shows a share of entity income. Your ownership share is what counts, so a 40% stake in a business means 40% of its income.

How Does Underwriting Treat Self-Employed Income?

Underwriters take your documented income, strip out what isn’t really income, and average what remains into a monthly figure. The method depends on which documentation lane you choose. Each lane tests something different, and none of them skip the review of credit, reserves, and the property.

Federal rules require a lender to make a good-faith determination that you can repay. The CFPB’s ability-to-repay compliance guide says the rule doesn’t force any single underwriting model. That is why several documentation paths exist. Alternative documentation is still underwriting, with a different input.

Lane one: tax returns

This is the traditional route, where lenders underwrite from your filed traditional personal-income documentation. Those lenders also want a full two-year history of that income type to compute a reliable average.

Here is the catch. The income used is net income, meaning revenue minus business expenses and deductions. Every write-off that trims your tax bill also trims your qualifying income. Your accountant did the job well, and the mortgage file pays for it.

Lane two: bank statements

Twelve months of business or personal bank statements replace the returns. The underwriter removes deposits that aren’t income, such as transfers between your own accounts, loan proceeds, and one-off windfalls. For business accounts, the lender applies an expense factor. The remainder, adjusted for your ownership share, is averaged into monthly qualifying income.

Think of it as eligible deposits, times your ownership share, less an expense factor, divided by the months in the window. No federal rule sets the expense factor. It is lender-specific, and across Lendmire’s wholesale network the strictest programs apply heavier factors than the more flexible ones. On owner-occupied cash-out, the program uses a fixed expense ratio, with a lower ratio of 75% available when an accountant prepares it.

Lane three: asset depletion

Some borrowers hold large liquid balances but lumpy income. Asset depletion is reviewed against those assets instead of deposits, reaching about 80% LTV on a primary residence. It suits a business owner between big contracts, or someone who recently sold a company. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.

Lane four: DSCR, for rentals only

If the property is an investment rental, the test moves off you and onto the asset. Debt service coverage divides monthly rent by the full monthly obligation, covering principal, interest, taxes, insurance, and association dues. Your write-offs and personal income don’t enter that calculation. Lendmire’s complete DSCR loans guide walks through that structure in detail.

Which Documentation Path Fits You?

The right path depends on your deductions, your business age, and what you’re buying. Heavy write-offs point away from returns. A rental purchase points toward DSCR. A primary residence with strong deposits points toward bank statements.

What a Write-Off Does to Your Number

Run the logic on a borrower with a business that deposits strongly all year. The tax return shows a modest profit because depreciation, vehicle costs, and home-office deductions absorbed much of it. A return-based lender sees only that thin profit.

A bank-statement lender sees the deposits. After removing transfers and one-offs, applying the expense factor, and averaging over twelve months, the qualifying figure can land well above the tax-return number. The loan doesn’t ignore expenses. It uses a lender-set factor in place of your itemized deductions. Whether that comes out better depends on how large your real expenses are versus the factor. A business with truly high costs may get no lift at all.

The practical move is to ask your accountant, well before applying, how each lane would read your numbers.

How Much Leverage Is Realistic?

On a primary residence, select lenders in Lendmire’s wholesale network go up to 90% LTV on a purchase or rate-term refinance, subject to lender guidelines. Stronger files earn the top of that range. Weaker credit, thinner reserves, or a larger loan pull it down.

Cash-out is a different ceiling. Owner-occupied cash-out on a primary residence or second home reaches up to 80% LTV, with the fixed expense ratio mentioned above. Investment-property cash-out tops out around 75% LTV. Never carry the 90% purchase figure into a cash-out plan. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.

Loan sizes generally run from $125,000 to $3,500,000, and reserves commonly sit near six months of the housing payment. For investment-property purchases on bank-statement documentation, leverage varies by lender. Investors buying rentals usually get cleaner guidance from the DSCR side.

Where the General Rule Breaks

Every rule here has edge cases, and these are the ones that trip borrowers most.

Under two years self-employed. Full-documentation lenders may accept one year if you worked the same occupation before at comparable or higher income. Alternative-documentation programs differ by lender, so a newer business isn’t automatically disqualified.

Commingled accounts. When personal and business money share one account, underwriters tend to apply conservative factors or ask for cleaner statements. Separating them before the statement window starts can head off both of those outcomes.

Business losses. A loss in a side venture can reduce qualifying income on a return-based file, since net income is the starting point.

Partial ownership. Only your share counts. A minority stake in a profitable company adds less than most owners expect.

Cash-heavy deposits. Expect more scrutiny. Underwriters want deposits they can trace to the business.

Rental versus residence. Bank-statement loans generally fit homes you live in. A 2-4 unit property where you occupy one unit can fit the owner-occupied lane, which may work better than DSCR for a house-hack. A property you won’t live in belongs in the investor lane.

Here’s one more: a lender working from your own deposits isn’t relaxed about it. Non-QM loans still require an ability-to-repay review. HousingWire describes bank-statement and DSCR loans as the common non-QM options and stresses they aren’t careless or unverified lending.

Owner-Occupied or Rental? The Disclosure Difference

Occupancy decides which rulebook applies. An owner-occupied file, whether a primary residence or second home, is a consumer mortgage, and 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. Keep the two straight when you plan. Short-term rental rules can vary by city, county, HOA, and property type, so confirm local rules before relying on projected rental income.

Pricing and payment figures aren’t given here, because every file is priced individually.

Why Self-Employed Michigan Files Stall

Most delays come from the file, not the borrower. Four problems show up repeatedly.

• Large unexplained deposits that the underwriter can’t trace.
• Overdrafts or transfers that muddy the statement window.
• Income that dropped year over year with no explanation.
• A down payment pulled from business funds without showing the business can spare it.

Most are fixable with preparation. Write a short letter explaining a down year. Move personal spending out of the business account. Keep deposits consistent. If a file does stall, a different documentation lane may read the same business more favorably.

History matters here too. The US Senate release on self-employed mortgage access explains that lenders leaned toward qualified-mortgage loans after the 2013 rule because of liability concerns on everything else. That preference is part of why self-employed borrowers got steered into specialized programs.

A Practical Preparation Timeline

Start about twelve months before you apply if you can. Separate business and personal accounts first. Keep deposits steady and avoid moving money around for no reason. Pay down revolving balances to support your credit profile. Meet with your accountant to see how returns and statements would each read.

In the final few months, gather statements, entity documents, and a year-to-date profit-and-loss. Keep reserves liquid. Then compare lanes before committing, not after.

Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.

Key Terms Defined

Non-QM loan: A mortgage that uses alternative documentation instead of the standard qualified-mortgage income tests.

Expense factor: The percentage a lender subtracts from business deposits to estimate real operating costs.

Asset depletion: A way to qualify by converting liquid assets into a monthly income figure.

DSCR: Debt service coverage ratio, meaning monthly rent divided by the full monthly obligation on an investment property.

Profit-and-loss statement: A summary of business revenue and expenses over a period.

Reserves: Liquid funds left after closing, commonly measured in months of housing payments.

Consumer mortgage licensing for this lane covers 16 states, and each file is underwritten individually, so nothing here is a commitment to lend. Michigan’s mix of metro Detroit professionals, Grand Rapids tradespeople, and seasonal northern-Michigan operators shows why one documentation path rarely fits every earner.

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

About Lendmire

A non-QM mortgage broker (NMLS# 2371349), Lendmire arranges DSCR financing for real estate investors in 41 markets — 40 states plus Washington, D.C. Because deals are underwritten primarily on property cash flow rather than personal income documentation, the structure suits self-employed buyers and entity-owned portfolios. Lendmire places loans through wholesale investor lenders; it is not a direct lender. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB Ability-to-Repay and Qualified Mortgage compliance guide

2. HousingWire non-QM loans guide

3. US Senate release on expanding mortgage access for self-employed workers