Self-employed and non-QM
Your tax return is not your income.
If you own a business, run cattle, contract seasonally, or hold three K-1s, a standard underwriter reads your tax return and sees a smaller income than you actually have. Depreciation, write-offs and retained earnings all work against you on paper. There are documented, fully legal paths that read the real picture.
Who this is for
Business owners, ranchers, contractors and multi-entity borrowers.
Anyone whose net taxable income understates what the business actually produces. Outfitters and guides, builders and trades, ranch and ag operations, professionals with partnership income, and investors buying rental property on the property's own cash flow.
- Sole proprietors and single-member LLCs.
- S-corp owners taking a modest W-2 salary plus distributions.
- Partnership and multi-entity K-1 holders.
- Rental property investors using DSCR.
The sequence
How it actually works.
01
Read the real picture first
We look at two years of returns, business statements and entity structure and calculate qualifying income the conventional way before anything else.
02
Try conventional first
Depreciation, depletion, amortization and business use of home are often added back. Many self-employed borrowers qualify conventionally once the add-backs are done correctly.
03
Choose the documentation path
If conventional income falls short, we move to bank statements, a P&L with a CPA letter, asset depletion, 1099-only, or DSCR on rental property.
04
Build the income file
12 or 24 months of statements, an expense factor supported by your CPA, or an asset schedule. Every number traceable to a document.
05
Price the tradeoff
We show you conventional versus non-QM side by side, in dollars per month, so the decision is yours with the real cost visible.
06
Close, then plan the exit
Many non-QM borrowers refinance to conventional in two to three years once returns catch up. We set that up at the start.
What Montana makes tricky
The parts that decline a file somewhere else.
Seasonal revenue
Outfitters, builders, ranchers and tourism businesses do not earn twelve equal months, and averaging matters.
Multiple entities
An LLC, an S-corp and a partnership share is normal here and it is not a red flag, it is just more reading.
Land as an asset
Owned ground can support an asset-based path even when the income statement is lumpy.
The two-year rule and its exceptions
Most programs want two years of self-employment. One year is possible with prior W-2 work in the same field, strong reserves and a documented trajectory. It is an exception, not a default.
The documentation paths, plainly.
Bank statement, 12 or 24 month
Qualifying income is derived from business deposits with an expense factor applied. Twenty-four months smooths a seasonal business; twelve helps a business that grew recently.
P&L with CPA letter
A prepared profit and loss statement supported by a letter from your CPA or tax preparer, sometimes paired with a shorter statement history.
Asset depletion
Liquid assets are converted to a monthly income stream over a set term. Useful for retired or asset-rich borrowers with modest reported income.
DSCR for rental property
The property qualifies on its own rent versus its payment. Personal income is not used, which keeps investment purchases off your personal ratios.
1099 programs
For contractors paid on 1099 who do not want deposit-level documentation, qualifying from gross 1099 income with an expense factor.
How conventional treats you
K-1 income requires distributions or documented access plus business liquidity. Depreciation and depletion add back. Business use of home adds back. Done right, this alone closes a lot of files.
Requirements
Typical numbers.
| Documentation type | Bank statement / P&L / asset / 1099 / DSCR |
|---|---|
| Months of statements | 12 or 24 typical |
| Minimum credit score | 660 – 700 typical |
| Cash to closeA lower score or a shorter self-employment history pushes it higher. We quote it exactly once we see the file. | Varies by program |
| Reserves after closing | 3 – 12 months typical |
| Self-employment historyOne year possible with documented prior experience in the same field. | 2 years typical |
| Pricing versus conventionalTypically 0.75 to 2.00 percentage points depending on documentation and profile. | Higher |
Typical ranges, not program rules. Non-QM guidelines vary widely by investor and change often. Non-QM costs more than conventional. If you qualify conventionally, we will tell you and put you there.
Questions
Asked and answered.
- Neither exactly. On a bank statement program we total qualifying business deposits, strip transfers and non-business items, then apply an expense factor. That factor is often 50% by default, and can be lower when your CPA documents actual expense ratios. The result is your qualifying income.
- Twelve or twenty-four. Twenty-four months smooths out a seasonal Montana business and usually prices better. Twelve months helps when the business grew recently and the older year would drag the average down.
- Yes. Asset depletion converts documented liquid assets into a monthly income figure over a set term. Retirement accounts are typically discounted for age and liquidation cost. It pairs well with land-heavy balance sheets and lumpy earnings.
- No. Non-QM means the loan does not meet the Qualified Mortgage documentation definition. It does not mean no underwriting. These files are fully documented, fully underwritten, ability-to-repay compliant, and typically require better credit and more reserves than conventional.
- Very often, and it is worth planning for. Once you have two years of returns that show the income, or once you adjust how the business reports, we refinance to conventional pricing. We flag that timeline at the original closing so it does not get forgotten.
Next step
Send the returns. We will read them properly.
Two years of returns and a recent statement history is enough for us to tell you which path fits and what it costs against conventional. No guessing, no generic pre-qualification letter.
Opens our secure application at bisonteam.floify.com. About 12 minutes.
Calls our Montana team in Missoula. Direct line, not a call center.