Mortgages for Freelancers & Gig Workers: Your Path to Home ownership

Can Gig Workers Get a Mortgage? 

Freelancers and gig workers can absolutely get a mortgage, and you have several great options to choose from. 

Traditional agency loans (conventional/FHA/VA) work great if your tax returns show that you have sufficient income, while non-QM options (bank statement, 1099-only, P&L-only, and asset depletion) help when business write-offs reduce your adjusted gross income.

The catch, however, is that you’ll have to provide a 12- to 24-month financial history, keep adequate reserves, and possibly even accept higher rates or down payments on Non-QM products.

Agencies working with self-employed borrowers include Fannie Mae DU, Freddie Mac LPA, FHA (HUD 4000.1), and VA for qualifying borrowers.

Who Counts as “Self-Employed” for Underwriting?

You're considered self-employed when you own 25% or more of a business, receive 1099 income for services, or report income on Schedule C of your personal tax returns. This typically includes:

• Independent contractors and freelancers who get 1099 forms instead of W-2s - think rideshare drivers, delivery workers, consultants, and service providers
• Sole proprietors running their own business under their name or a business entity
• Single-member LLC owners who report business income on their personal tax returns
• S-Corp or Partnership owners with 25% or more ownership who receive K-1 forms
• Platform workers earning money through Uber, Upwork, Shopify, and similar services

There are three main things that underwriters look at when reviewing your mortgage application: 

• Stability (do you earn consistently?)

• Continuance (will this income keep coming?)

• Trend (is your income going up, staying the same, or dropping?)

Loan Paths Overview

Loan Programs

Conventional Loans for Self-Employed Borrowers (DU)

Conventional loans through Fannie Mae's Desktop Underwriter system are often the sweet spot for self-employed borrowers who can show steady income through their tax returns. 

You'll get competitive interest rates and can put down as little as 3% if you're a first-time buyer.

Here’s how they typically calculate your income: 

Lenders take the average of your Schedule C net income or K-1 distributions from the past two years. If your income is trending up, they'll give more weight to your recent year.

What you’ll need: 

• Two years of complete personal and business tax returns, including all schedules and amendments, 
• Year-to-date profit and loss statements if more than three months have passed since your tax filing date.

FHA Loans for Self-Employed Borrowers (HUD 4000.1)

FHA loans are a great option for self-employed borrowers with lower credit scores or limited savings. More lenders are getting comfortable with self-employed borrowers, and FHA is particularly flexible with non-traditional income.

Some major benefits that come with FHA loans include: 

• Down payments as low as 3.5%
• Credit scores accepted down to 580 (10% down) or 500 (with 10% down)
• More flexible debt-to-income ratios up to 57% in some cases

Much like conventional loans, FHA requires two years of tax returns. However, it allows for more creative income calculations, including adding back non-cash deductions and considering irregular income patterns with proper explanation.

VA Loans for Self-Employed Veterans 

Self-employed veterans can access VA loans with zero down payment, no private mortgage insurance, and competitive interest rates. The VA is generally accommodating to self-employed veterans who can demonstrate stable income.

VA underwriters can be more lenient with income calculations for service members, particularly those using military skills in their civilian businesses or contracting work.

Bank-Statement Loans (Non-QM)

Bank statement loans are a type of non-QM loan that allows self-employed borrowers to qualify based on their bank statements rather than tax returns, W-2s, or other standard income documents. 

Here’s how it works:

Lenders will require you to show a 12 to 14-month bank statement that demonstrates sufficient cash flow.  

You’ll need to have the following documentation ready: 

• Personal and/or business bank statements
• CPA letter confirming self-employment status
• Business license or other evidence of ongoing business activity

This is a good option for entrepreneurs, freelancers, and gig economy workers who write off substantial business expenses, reducing their tax liability but also their qualifying income on traditional applications.

The only trade-off, however, is that interest rates typically run 0.5-2% higher than conventional loans, with down payment requirements of 10-25% and more stringent reserve requirements.

1099-Only Mortgages (Non-QM)

1099-only loans allow qualifying based solely on your 1099 forms without requiring full tax returns. 

Lenders will typically average your 1099 income over 12-24 months and verify business continuance through contracts or ongoing client relationships.

You’ll need to ready the following documents for a 1099-only mortgage: 

• All 1099 forms for the qualifying period
• Year-to-date income verification
• Business license
• Evidence of ongoing contracts or client relationships

A 1099-income mortgage is an ideal option for independent contractors with multiple 1099 income sources who want to avoid the complexity of full tax return analysis.

P&L-Only Mortgages (Non-QM)

P&L-only loans use CPA-prepared profit and loss statements combined with bank account activity to verify income. These loans typically have the strictest overlays and highest costs among Non-QM options.

You’ll need to have the following documents ready to go: 

• CPA-prepared P&L statements
• Business and personal bank statements showing deposits consistent with reported income 
• CPA letter confirming business operation

Asset-Depletion Mortgages (Non-QM)

Asset depletion loans convert liquid assets into qualifying monthly income by dividing total eligible assets by the loan term. This option works well for asset-rich borrowers with irregular or difficult-to-document income.

Here’s how the calculation is done: 

• Total liquid assets minus funds needed for down payment and reserves
• divided by the loan term in months equals the monthly qualifying income

You’ll be required to have the following documents ready: 

• Asset account statements
• Verification of asset accessibility
• Reserve requirements of 6-12 months of payments

DSCR Loans (Investors Only, Not Owner-Occ)

It’s important to note here that DSCR (Debt Service Coverage Ratio) loans are exclusively for investment properties and cannot be used for primary residences or second homes. These loans qualify based on the rental property's income potential rather than your income.

ITIN Home Loans: When SSN Isn’t Available

ITIN loans serve borrowers without Social Security numbers, including non-resident aliens and others with Individual Taxpayer Identification Numbers. These loans can follow either traditional documentation paths or alternative documentation methods.

Before you choose this option, keep the following in mind: 

• There will be significant lender overlays
• Higher down payment requirements
• Limited program availability, which makes these loans challenging 

What Moves Approval Odds: Credit, DTI, Reserves, LTV

Credit Score 

• ≥740: Access to all programs with the best pricing
• 700-739: Most programs available with standard pricing
• 660-699: Some program restrictions, higher rates
• 620-659: Limited to FHA/VA or Non-QM options
• <620: Non-QM only, or focus on credit repair first

Debt-to-Income Ratios

Traditional Agency Loans: Target DTI ≤43% for automated approval, though manual underwriting can allow higher ratios with compensating factors.

Non-QM Loans: More flexible DTI allowances, sometimes up to 50% with strong credit and reserves.

Reserve 

Agency Loans: 2-6 months of mortgage payments are typical

Non-QM Loans: 6-12 months common, with more reserves improving approval odds and pricing

Loan-to-Value Impact

Lower LTV ratios improve both approval chances and pricing across all programs. Non-QM loans typically require 10-30% down payments, with lower down payments commanding premium pricing.

Self-Employed Documentation Checklist

Calculators Section

Bank Statement Income Estimator

The formula is as follows: 

Average Monthly Qualifying Deposits × (1 - Expense Factor) = Qualifying Income

Example Calculation:

• 24-month total deposits: $240,000
• Average monthly deposits: $10,000
• Lender expense factor: 35%
• Qualifying income: $10,000 × (1 - 0.35) = $6,500/month

Self-Employed DTI Calculator

The formula is as follows: 

(PITI + Monthly Debts) ÷ Qualifying Income = DTI Ratio

Example Calculation:

• Monthly mortgage payment (PITI): $2,200
• Other monthly debt payments: $800
• Total monthly obligations: $3,000
• Qualifying income: $6,500
• DTI: $3,000 ÷ $6,500 = 46.2%

You can use an online detailed DTI calculator as well, instead of crunching numbers manually. 

Using Co-Borrowers to Qualify 

Occupant Co-Borrower Strategy

Adding a W-2-employed spouse or family member who will live in the home can significantly stabilize your debt-to-income ratio and improve approval odds. Their steady employment history complements your self-employed income.

Non-Occupant Co-Borrower Options

FHA allows non-occupant co-borrowers (like parents) on certain loan programs, while some conventional loan programs also permit this with specific overlays. This strategy can help with down payment and income qualification.

• Benefits: Improved DTI ratios, stronger application, potential access to better loan programs
• Risks: Joint liability, credit impact for both parties, occupancy requirements must be clearly understood

Edge Cases & Pitfalls for Gig-Worker Mortgages

Here are some common situations that can catch gig workers off guard during the mortgage process.

• Declining Income Trends: When recent income is lower than historical averages, underwriters use the more conservative recent figures. Prepare detailed letters of explanation addressing temporary factors and future income stability.
• Less Than 24 Months Self-Employed: If you've been self-employed for less than two years, document previous experience in the same field as an employee. Career continuity helps demonstrate income stability despite employment status change.
• Multiple Income Streams: Gig workers often have several 1099 sources. Document all income streams thoroughly and explain any gaps in employment or client relationships that might raise underwriter concerns.
• Business Entity Changes: Transitioning from sole proprietorship to LLC or S-Corp requires documentation showing business continuity rather than a new business start date.
• Add-Back Confusion: Understand which business deductions can be added back to income (depreciation, home office) versus those that cannot (actual business meals, marketing expenses, equipment purchases).

Down Payment, Gifts & Assistance Programs

Down Payment Assistance for Owner-Occupants

Many state and local down payment assistance programs work with conventional and FHA loans for self-employed borrowers. Make sure to research your area's specific programs and understand the stacking rules.

Gift Fund Requirements

Gift funds from family members are generally acceptable for down payments on agency loans, with specific sourcing and documentation requirements. The only catch is that donors must provide gift letters and prove the funds' legitimate source.

Non-QM Down Payment Expectations

Non-QM loans typically require higher down payments (about 10-30%) and rarely qualify for down payment assistance programs. Always plan for substantial cash requirements and factor this into your loan choice decision.

How to Get Approved as a Gig Worker

Step 1: Check Your Credit and Optimize Utilization

Pull your credit reports and address any issues, and pay down credit card balances to under 10% utilization across all cards.

Step 2: Choose Your Documentation Path

Decide between traditional tax return documentation or alternative Non-QM options based on your actual financial situation. If business write-offs significantly reduce your taxable income, Non-QM might be your better path.

Step 3: Gather Complete Documentation

Follow the documentation checklist for your chosen loan type. Make sure to prepare letters of explanation for any income irregularities, business changes, or credit issues.

Step 4: Get Pre-Qualified Through Multiple Channels

For traditional loans, run through automated underwriting systems (DU/LPA) to get initial approval. For Non-QM loans, shop multiple lenders for rate comparisons.

Step 5: Lock Your Rate and Navigate Underwriting

Once you've chosen your loan program and lender, lock your interest rate and prepare for a detailed underwriting review. 

Step 6: Close Successfully

Final underwriting approval leads to closing preparation. Make sure all funds are properly sourced according to your loan program requirements. 

FAQs: Mortgages for Freelancers & Gig Workers

Can you get a mortgage with gig work?

Yes, multiple loan programs accommodate gig workers. You can choose from traditional agency loans using tax returns, Non-QM options using bank statements or 1099 documentation.

How do self-employed people qualify for a mortgage?

Self-employed borrowers qualify through income documentation, good credit history, sufficient reserves, and debt-to-income ratios within program guidelines. 

Which mortgage lender is best for the self-employed?

Always look for lenders with dedicated self-employed programs, experienced underwriters familiar with complex income scenarios, and access to both agency and Non-QM loan products.

Who gives loans to gig workers? 

Both traditional lenders (banks, credit unions, mortgage companies) and specialized Non-QM lenders offer loans to gig workers. The key is finding the right lender.

How much history do I need for mortgages as a self-employed person?

Traditional agency loans typically require 24 months of self-employment history, while Non-QM options may accept as little as 12 months.

Are you ready to explore your mortgage options as a gig worker or freelancer? 

At the end of the day, it’s really just about choosing the right loan program and working with lenders who understand the challenges and opportunities of self-employed borrowers. 

With Truss Financial Group, homeownership is absolutely within your reach!