Best Loans for Self Employed Borrowers

A $450,000 mortgage at 7.00% carries a principal and interest payment of about $2,994 per month. At 6.625%, that drops to roughly $2,881 – a difference of $113 per month, or $6,780 over five years before tax treatment, refinance costs, or faster principal paydown. For many buyers, finding the best loans for self employed borrowers is less about chasing one headline rate and more about matching the loan to how income is actually documented.

By Duane Buziak, Mortgage Maestro, NMLS#1110647

Table of Contents

Why self-employed borrowers get stuck
Best loans for self employed borrowers in Virginia
Program comparison table
What underwriters really look at
Virginia market numbers that matter
Payment and cost comparison table
5-step roadmap to qualify
Competitor comparison in Virginia
FAQ
Legal disclaimer

Why self-employed borrowers get stuck

The issue is usually not income. It is usable income. A business owner in Richmond, Glen Allen, or Midlothian might gross $180,000, write off equipment, mileage, meals, depreciation, and home office expenses, then show far less on tax returns than a salaried borrower earning the same amount.

That creates a mismatch between tax strategy and mortgage underwriting. Conventional and government-backed loans often rely on net taxable income after business deductions. If those deductions are aggressive, qualifying income can shrink fast even when cash flow is healthy.

This is why self-employed borrowers should look at loan fit first, not brand names first.

Best loans for self employed borrowers in Virginia

For most Virginia buyers, the strongest options are conventional, FHA, VA if eligible, jumbo for larger balances, and non-QM bank statement loans. The best answer depends on down payment, credit, reserves, and how income appears on returns or bank deposits.

Conventional loans

Conventional financing is often best when tax returns still show strong net income. These loans can offer competitive pricing, especially when the loan amount stays within conforming limits. In 2025, the baseline conforming loan limit for most areas is $806,500, according to Fannie Mae at https://www.fanniemae.com.

Many borrowers need at least a 620 score, but stronger pricing usually shows up at higher tiers such as 680, 720, and above. If business income is stable for two years and debt ratios are reasonable, conventional can be the cleanest option.

FHA loans

FHA can work well for self-employed borrowers with moderate credit scores or higher debt-to-income ratios. A 580 score is a common floor for 3.5% down, though lender overlays can be stricter. The trade-off is mortgage insurance, both upfront and monthly.

For a buyer in Chesterfield or Henrico County who has solid recent income but limited savings, FHA may be easier to qualify for than conventional.

VA loans

VA loans remain one of the best loans for self employed borrowers who are eligible veterans or service members. They allow 0% down in many cases, do not require monthly mortgage insurance, and can be very forgiving on structure when the file is documented correctly. The U.S. Department of Veterans Affairs publishes program guidance at https://www.va.gov.

The catch is that self-employment income still has to be documented and analyzed. VA is not a shortcut around income review. But for eligible borrowers, the monthly payment advantage can be significant.

Bank statement loans

Bank statement loans are a major solution for borrowers whose deposits tell a stronger story than their tax returns. Instead of relying primarily on net taxable income, these loans may use 12 to 24 months of personal or business bank statements to calculate qualifying income.

They usually require more down payment than agency loans, often 10% to 20% depending on credit and occupancy. Minimum scores commonly start around 620 to 660. Reserve requirements may run 6 to 12 months of housing payment, and pricing is usually higher than conventional. Still, for many business owners, this is the difference between approval and denial.

Jumbo and non-QM options

In higher-price pockets near Charlottesville or parts of waterfront Hampton Roads, loan size can force borrowers above conforming limits. Jumbo and other non-QM products can help, but underwriting gets more document-intensive. Expect stronger reserve requirements, often 9 to 12 months or more, and closer review of liquidity and business stability.

Program comparison table

What underwriters really look at

They want consistency, not perfection. A self-employed borrower usually needs a two-year history in the same line of work, though exceptions exist. They also look for stable or rising income, business health, manageable debts, and enough assets to close and still retain reserves.

If income dropped last year, expect questions. If your business account has large unexplained transfers, expect questions. If you switched from sole proprietor to S-corp, that can be fine, but documentation needs to tie together cleanly.

A soft-pull prequalification can help early because it lets you test payment range and likely eligibility without immediately adding a hard inquiry.

Virginia market numbers that matter

Loan choice also depends on local price points. In Henrico County, the median home sold price was about $410,000, according to Redfin market data: https://www.redfin.com. That matters because a borrower putting 10% down there is financing roughly $369,000 before closing costs and prepaid items.

Closing costs in Virginia commonly land around 2% to 5% of the purchase price depending on loan type, escrows, points, title charges, and local taxes. On a $410,000 purchase, that can mean roughly $8,200 to $20,500.

Inventory remains tight in many Richmond-area submarkets, especially desirable pockets near Short Pump, Glen Allen, and parts of Chesterfield with strong school demand. In competitive listings, sellers often favor buyers whose financing is already structured around realistic documentation, not hopeful assumptions.

Payment and cost comparison table

| Scenario | Loan amount | Rate | P&I payment | 5-year payment difference vs 7.00% | Estimated closing cost range | |—|—:|—:|—:|—:|—:| | Conventional example | $450,000 | 7.00% | $2,994 | Baseline | $9,000-$18,000 | | Conventional better pricing | $450,000 | 6.625% | $2,881 | Save about $6,780 | $9,000-$18,000 | | FHA example | $450,000 | 6.50% | $2,844 | Save about $9,000 | $9,500-$19,500 | | Bank statement example | $450,000 | 7.50% | $3,147 | Costs about $9,180 more | $10,000-$20,000 |

These figures exclude taxes, insurance, mortgage insurance, and HOA dues. They are examples, not rate quotes.

5-step roadmap to qualify

1. Separate tax strategy from mortgage strategy

Before shopping, review the last two years of personal and business returns. If write-offs are heavy, a bank statement or non-QM path may fit better than conventional.

2. Organize 12 to 24 months of documents

Have business bank statements, year-to-date profit and loss, business license, CPA letter if available, and current balance sheets ready. Clean files close faster.

3. Measure assets beyond down payment

Do not stop at cash to close. Check reserves. A self-employed borrower buying a primary residence may qualify with little to no reserve requirement on some programs, while jumbo or bank statement loans may expect six months or more.

4. Get prequalified before making offers

In active Virginia submarkets, speed matters. A realistic prequalification based on actual documents is stronger than a quick online estimate.

5. Compare loan structure, not just rate

A lower rate with high points may cost more upfront. A bank statement loan may carry a higher rate but be the only viable option if tax returns suppress income. The right comparison is approval odds, payment, cash needed, and flexibility.

Competitor comparison in Virginia

Online lenders such as Rocket can be fast for clean W-2 files, but self-employed income often benefits from a broker model with more lender options. Regional and local names such as Movement, NFM, Atlantic Coast, Alcova, C&F, CrossCountry, CMG, and First Heritage may each have niche strengths, but overlays, turn times, and non-QM menus vary.

CapCenter may appeal to fee-conscious shoppers. Veterans United is well known for VA lending. UWM is frequently competitive on speed and product depth through brokers. The practical point is that self-employed borrowers should compare how each lender handles bank statements, P&L usage, reserve requirements, and business add-backs.

One caution for Richmond-area searchers: Colonial 1st Mortgage still appears in some Richmond and Glen Allen directory listings. The Better Business Bureau lists the business as out of business, the domain colonial1mtg.com no longer resolves to a functioning mortgage company website, and the most recent Yelp review was posted in 2017. Borrowers who see it in search results should verify current licensing status at nmlsconsumeraccess.org before making contact.

FAQ

Do self-employed borrowers need two full years in business?

Usually, two years is the standard benchmark. Some exceptions exist when a borrower has prior related experience and a strong current profile.

Are bank statement loans always more expensive?

Usually yes, compared with conventional or government-backed financing. But they can still be the cheaper real-world option if the alternative is not qualifying at all.

Can I use one year of tax returns?

Sometimes. It depends on program rules, automated findings, and whether the most recent year reflects stable income.

What credit score do I need?

620 is a common starting point for conventional and many non-QM products, 580 is common for FHA, and stronger pricing typically comes with higher scores.

How much down payment should I expect?

Anywhere from 0% for eligible VA borrowers to 3.5% for FHA, 3% to 5% or more for conventional, and often 10% to 20% for bank statement loans.

Are DSCR loans good for self-employed investors?

Yes, especially when qualifying based on rental property cash flow is easier than documenting personal income. They are generally for investment property, not primary residence.

Legal disclaimer

This article is for educational purposes only and does not constitute financial or legal advice.

If you are self-employed, the smartest move is not picking the flashiest loan name. It is choosing the structure that fits your tax returns, deposits, reserves, and the price range you are targeting in the Virginia market.