Who this article is for
This article is for:
Business owners
Freelancers, 1099 contractors, and gig workers
Borrowers with side businesses or mixed income
Anyone preparing documents for a Nestwise application
How self-employed income works for a Nestwise mortgage
Self-employed borrowers can qualify for a Nestwise mortgage as long as their income meets Fannie Mae and Freddie Mac guidelines. These rules focus on stability, history, and accurate documentation—not the type of business you run.
Nestwise uses standardized, compliant methods to verify and calculate income.
What counts as self-employed income?
You are considered self-employed if you:
Own a business (sole proprietor, LLC, partnership, or corporation)
File Schedule C, E, or K-1
Receive 1099 income
Work as a contractor or freelancer
Have significant side-business income
If you own 25% or more of a business, you are treated as self-employed for mortgage purposes.
Documents self-employed borrowers must provide
Most self-employed borrowers will need:
Two years of personal tax returns
Two years of business tax returns (if applicable)
Year-to-date profit and loss (P&L) statement
Business bank statements supporting the P&L
K-1 forms, if you own part of a partnership or corporation
Verification of business ownership or licensing
Nestwise may request additional documents depending on your business structure.
How self-employed income is calculated
Conventional guidelines require income to be:
Documented
Stable
Likely to continue
Nestwise typically uses:
A two-year average of taxable business income, or
The most recent year, if income is stable or increasing
Examples of income included:
Net business income
Depreciation (may be added back)
Depletion (may be added back)
Certain non-cash expenses
Pass-through income (if stable and documented)
Examples of income that cannot be used:
Unverifiable cash income
One-time business gains
Income without supporting documentation
Income from a business that is losing money
If business income fluctuates significantly, the lower or more recent year may be used.
What if your business had a loss?
If your tax returns show:
A business loss, or
A declining trend over two years
Your qualifying income may be reduced.
In some cases, no qualifying income can be calculated.
If this happens, Nestwise may encourage you to consider Doorly™, which offers more flexible financing options.
Mixed income (W-2 + self-employment)
If you earn both W-2 and self-employed income:
Both can be used
Each source must meet its own documentation rules
Stability must be shown for each income type
This is common for borrowers with a primary job and a side business.
Common reasons Nestwise may request more information
Additional documents may be required if:
Your income increased or decreased sharply
Your P&L and bank statements don’t match
Your business is new or recently restructured
You have significant write-offs that reduce taxable income
These requests are normal and help ensure income meets agency standards.