The tax return problem
Every self-employed buyer in Philadelphia runs into the same wall. You spent the year writing off the truck, the tools, the mileage, the half of the phone bill, and the accountant did a fine job. Then the lender opens Schedule C and sees a business that made $38,000 on $140,000 of revenue. Conventional and FHA loans qualify you on the net figure, after the write-offs, which is the number you worked so hard to shrink.
That’s the whole reason this page exists. There are two ways through: qualify on the returns as they stand, or use a program that looks at the money that actually came into the bank. Which one fits depends on how aggressive the write-offs were and how much you have for a down payment.
Two paths
| Full documentation | Bank-statement loan | |
|---|---|---|
| Income proof | 2 years of tax returns, year-to-date profit and loss | 12 or 24 months of personal or business bank statements |
| How income is calculated | Net profit from the returns, averaged | Deposits, with a lender-set expense factor on business accounts, often around 50% |
| Loan types | Conventional, FHA, VA, USDA, PHFA | Non-QM, lender’s own program |
| Minimum down | 3% conventional, 3.5% FHA, 0% VA and USDA | From 10%, 20% or more is common |
| Credit floor | 620 conventional, 580 FHA at 3.5% down | No universal floor, typically 660–700 or better |
| Self-employment history | Usually 2 years | Usually 2 years |
Full documentation gets you every standard program, including the low-down-payment ones and the grants. If your returns support the payment, take this path. It’s cheaper.
The bank-statement loan is for the buyer whose returns don’t support the payment but whose deposits obviously do. The lender adds up 12 or 24 months of deposits and, on a business account, applies an expense factor, often around 50%, to estimate what’s really income. Personal accounts usually get less of a haircut. The trade is a bigger down payment and pricing above conventional.
What to have ready
Get these together before the first call, and the pre-approval moves in days instead of weeks.
- Two years of personal federal returns with every schedule, and business returns if you file them separately.
- A year-to-date profit and loss statement, even a simple one.
- Twelve to twenty-four months of bank statements, all pages, including the blank ones the underwriter will ask for anyway.
- Proof the business exists and is yours: the city business license, a contractor’s license, a liquor license, whatever applies.
- A CPA or tax preparer’s letter confirming how long you’ve been at it, if you have one.
- Any 1099s from platforms or clients.
Big unexplained deposits get questioned, so know where they came from. The lender is looking for a business that’s been stable for two years and isn’t shrinking.
The Philly version
The self-employed buyer here is the contractor who flips a rowhome in Point Breeze between kitchen jobs, the couple running a BYOB on East Passyunk, the barber in Olney with a chair and a cash app, the woman who drives rideshare in the morning and sells on the side in the afternoon. City Council rejected a rideshare tax in June 2026, so the drivers got a break there, and the city’s business license is the document that proves most of these businesses exist.
Grants don’t discriminate by tax form. Philly First Home pays up to $10,000, or 6% of the price, whichever is less, for a first-time buyer under the income limits, and a two-person household qualifies up to $98,200. PHFA’s K-FIT covers 5% of the price, forgiven over ten years, on a Keystone Home Loan with a 660 score. Both want documented income, and both stack on top of a full-doc loan. A bank-statement loan usually can’t carry them.
Philly First Home requires one-on-one counseling before you sign the Agreement of Sale, and it must be repaid if you refinance or move within 15 years. A self-employed buyer who plans to refinance in year three to pull cash for the business should know that going in.
Then the transfer tax, which nobody’s business structure gets around. The city’s 4.578% rate splits by custom, so the buyer pays 2.289%, and on a $300,000 rowhome that’s $6,867 in cash at closing on top of the down payment. The suburbs charge 2%, so the same house in Upper Darby costs $3,750 at 2.5%, and in Bensalem $3,000. Run your real cash-to-close on the affordability calculator before you write an offer.
When the rental is the business
If the house you’re buying is a rental, your tax return may not matter at all. A DSCR loan qualifies on the property’s rent, with 20–25% down and no personal income documentation, which for a lot of self-employed landlords is the only loan that ever made sense. The investment property page covers it. For a house you’ll live in, the choice is between conventional, FHA, and the bank-statement route, and you should see all three priced.
Start with one call
Skip the part where a salaried loan officer tells you to come back when you have a W-2. Tell us what you do and what the deposits look like, and the lender who calls you back does self-employed files. Call us.