5 Mistakes Self-Employed Buyers Make When Applying for a Mortgage

Running your own business or working as a freelancer gives you the exciting opportunities of freedom, flexibility, and the chance to earn as much as you can. However, when it comes to buying a home, those same income factors might seem to work against you.

At New Horizons Lending, we have the pleasure of working with many self-employed Texans every day. We've helped photographers in San Antonio, stylists in Helotes, and graphic designers in San Marcos, and have seen firsthand how small missteps in the mortgage process can lead to unnecessary delays or even denials.

If you're your own boss and are thinking about buying a home, here are five common mistakes to watch out for so you can move forward with confidence and peace of mind.

Mistake #1: Assuming You Can’t Qualify Without a W-2

Many self-employed buyers count themselves out before they’ve even started the process. It’s a common myth that you need a W-2 or traditional salary to get a mortgage. The truth is, you absolutely can qualify for a home loan—even if your income comes from multiple clients, 1099s, or a business you’ve built yourself.

At New Horizons Lending, we offer flexible programs tailored to self-employed borrowers. Instead of focusing on a single paycheck, we look at your real income picture, whether that comes through bank statements, business revenue, or a combination of sources.

Mistake #2: Relying Only on Tax Returns That Show Lower Income

Tax deductions are great for lowering what you owe, but they can hurt you when it's time to apply for a mortgage. Many self-employed professionals write off business expenses to reduce their taxable income, only to discover that lenders are now viewing them as "low income" on paper.

That’s why relying solely on tax returns can backfire.

The good news: there are loan programs that don't require full tax documentation. Depending on your situation, we may be able to use:

● 12–24 months of business or personal bank statements

● 1099 forms for contract work

● Even asset-based evaluations if you have strong savings

We’ll help you find the most accurate and advantageous way to document your income—no guesswork required.

Mistake #3: Waiting Too Long to Get Pre-Approved

In Texas real estate markets like San Marcos and San Antonio, homes don’t sit on the market for long. If you're waiting until you find the perfect property before getting pre-approved, you risk losing out to someone who already has their financing in place.

Self-employed buyers in particular benefit from early pre-approval. Unlike salaried employees, your income may require a few extra steps to verify, and we want to make sure everything is lined up ahead of time so you can make a strong offer when the time comes.

Our pre-approval process is designed to be fast, simple, and built for real-life entrepreneurs like you.

Mistake #4: Mixing Business and Personal Finances

It’s common (and understandable) for freelancers and small business owners to manage their personal and business expenses from the same account, especially early on. But when it comes to your mortgage application, this can create confusion and delays.

Clearly show:

● Where your income comes from

● How consistent your deposits are

● Whether your business is profitable

Keeping separate accounts not only makes this easier, but it can also improve your approval odds by painting a clearer picture of your financial stability. Even if you haven’t done this perfectly, we can still help you organize and present your income in a way that works.

Mistake #5: Applying Without a Plan

Self-employed buyers sometimes jump into the process without preparing the right documents or understanding how lenders will view their income. This leads to stress, back-and-forth, and avoidable delays.