If you are self-employed in Texas, your income on paper does not always tell the full story. You might have great cash flow, loyal clients, and a growing business, yet when you talk to a traditional lender, it feels like the numbers work against you instead of for you.
Being self-employed doesn’t mean you can’t afford a home. It means your income story is more complex, and honestly, that’s not a bad thing. You might write off business expenses that make your taxable income look smaller than what you actually bring home. You might have irregular income patterns that don’t translate well on a standard loan application. These are smart business moves, but they can work against you when you’re trying to get a mortgage.
That is exactly where self-employed and Non-QM home loan programs come in. They look at your income differently, so you are not punished for writing off expenses or structuring your business a little differently. This is not about cutting corners. It is about using a more flexible, real-world way to show that you can afford a home.
Understanding the Self-Employed Borrower Challenge
Traditional mortgage underwriting was built around the typical W-2 employee. Lenders want to see two years of tax returns, and they’re going to average your income based on what you reported to the IRS. If you’re like most self-employed folks, you’ve taken every legitimate deduction you could, which means your adjusted gross income might not reflect what you’re really earning.
This creates a frustrating situation. You know you can afford the mortgage payment. Your accountant knows you’re doing well. But the numbers on paper tell a different story. So what do you do when the conventional system doesn’t work for your situation?
What Is a Non-QM Loan?
Non-QM stands for non-qualified mortgage. It means the loan is designed outside of the standard mortgage rulebook most banks follow. The key idea is flexibility. Instead of forcing every borrower into a tax-return-based model, Non-QM lenders can use alternative methods to verify income for self-employed Texans, which could be a game-changer.
These loans still look at your ability to repay. They still review credit, income patterns, and reserves. They are just willing to evaluate your business the way you actually operate it, rather than demanding that your paperwork look like a salaried employee’s file.
Down payments for these programs often start around 10% to 15%, though some borrowers put down more to get better rates or avoid mortgage insurance. Interest rates might be slightly higher than conventional loans, but that’s the trade-off for the flexibility and the ability to get approved.
Non-Traditional Mortgage Programs That Work
-
Bank Statement Loan Programs
Bank statement loans have become increasingly popular for self-employed borrowers in Texas, and for good reason. Instead of using tax returns to verify income, lenders review your business or personal bank statements, typically looking at 12 to 24 months of deposits.
Lenders will typically use a percentage of your deposits to calculate qualifying income, often around 50% for business accounts (accounting for business expenses) or higher for personal accounts. This gives you credit for the money that’s actually flowing through your business without penalizing you for smart tax planning.
This type of loan can fit a wide range of self-employed Texans, including:
- Small business owners;
- Contractors and tradespeople;
- Online business owners;
- Freelancers with multiple clients.
If your cash flow is strong, yet your tax returns are trimmed down for tax planning, bank statement loans can bridge the gap between how money really moves in your life and what a traditional underwriter expects to see.
-
1099 Mortgage Programs
If you’re a contract worker, freelancer, or independent contractor receiving 1099s instead of W-2s, there are programs specifically designed for your income structure. These loans acknowledge that 1099 income is legitimate and stable, even if it doesn’t come from a traditional employer.
With a 1099 loan program, lenders may only require one year of income history instead of two, and they might be more flexible about how they calculate your qualifying income. Some programs will allow you to use your 1099 forms directly without requiring full tax returns, which can be a game-changer if your tax returns don’t tell your whole story.
This can be especially helpful in fields like:
- Real estate agents;
- Insurance agents;
- Consultants;
- Commission -based Sales professionals;
- Gig workers and platform-based earners.
The key is demonstrating consistency. If you’ve been working with the same clients or in the same field for a while, lenders can see that your income isn’t just a flash in the pan. You’re building something sustainable, and that matters.
-
Asset Depletion Loans
Asset depletion loans look at your assets, like savings accounts, investment portfolios, or retirement funds, and use those to qualify you for a mortgage. Instead of relying primarily on monthly income, this program allows certain liquid assets to be converted into a calculated monthly income figure for qualifying purposes.
If you have eligible assets, the lender can take a portion of those funds and spread them out over a set number of months, often tied to the loan term. That monthly figure is then used to help you qualify, even if your current business income is irregular or intentionally minimized on your tax returns.
Asset depletion loans can be especially helpful for:
- Business owners with significant cash reserves;
- Self-employed borrowers who hold large investment accounts;
- Entrepreneurs with income that fluctuates seasonally;
- Borrowers transitioning between businesses or industries;
- Buyers who recently received proceeds from a sale of assets.
Lenders can divide your total liquid assets by a certain number (often 360 months, representing a 30-year amortization) to create a monthly “income” figure for qualification purposes. This program makes a lot of sense if you’re semi-retired, between business ventures, or have substantial reserves that don’t show up as monthly income. Your wealth exists; it just needs to be recognized in a way that works within mortgage guidelines.
Benefits Of Using Non-Traditional Home Loan Programs
When used thoughtfully, Non-QM and self-employed-focused loans can offer real advantages.
- You can qualify based on how you actually earn money, not just what appears after aggressive deductions.
- You may qualify for a higher price range than you would with a traditional loan, since your income is measured more accurately.
- You keep the flexibility to run your business the way it makes sense for you, instead of feeling forced to file higher taxable income just to get a mortgage.
- If you are asset-rich but income light, asset depletion can help you qualify without restructuring your finances just to meet a lender’s checklist.
To be fair, there are trade-offs. Interest rates on Non-QM products can sometimes be higher than standard conventional loans. Down payment requirements can also be stronger. That is why it helps to talk through the numbers carefully so you know the cost and benefits.
Frequently Asked Questions About Self-Employed Home Loans
Q: Can I qualify for a self-employed mortgage with only one year of business history?
A: Yes, some programs like 1099 mortgage loans may accept just one year of income documentation. However, most bank statements and asset depletion programs work better with at least two years of self-employment history. Each lender has different requirements, so it’s worth exploring your options even if you’re relatively new to self-employment.
Q: Will my interest rate be much higher with a non-traditional mortgage program?
A: Interest rates on non-QM loans are typically higher than conventional rates, often by 0.5% to 2%, depending on your credit score, down payment, and the specific program. However, the ability to actually qualify and purchase a home often outweighs the slightly higher rate, especially since you can refinance later if your financial documentation improves.
Q: Do I need to make a larger down payment for these loan programs?
A: Generally, yes. Most non-traditional self-employed mortgage programs require down payments between 10% and 20%, though some may accept as little as 10% with strong credit and reserves. The larger your down payment, the better your rate and terms will typically be.
Q: Can I qualify if my credit score is not perfect
A: Many Non-QM lenders are more flexible with credit than traditional programs, especially when strong income or assets are present. A few late payments in the past do not always disqualify you; the full picture matters, not just one number on a screen.
Why Texas Borrowers Should Consider These Options
Texas has a thriving entrepreneurial community. From tech startups in Austin to real estate investors in Houston, oil and gas professionals in the Permian Basin to small business owners in San Antonio, the self-employed population here is substantial and growing.
The Texas housing market moves fast, and you don’t want to be stuck on the sidelines because your income doesn’t fit a traditional mold. These non-qualified mortgage programs give you the flexibility to compete with W-2 borrowers who have more straightforward documentation but not necessarily better financial stability than you.
