Quick fit check
| Your situation | Programs to look at first |
|---|---|
| Self-employed, no school or public safety tie | HFA1, SmartStep grant, Preferred, metroDPA, Pikes Peak DPA |
| Spouse works full-time for a public school | Schools To Home, with your business income counted if it has history |
| You volunteer with a fire department or district | Colorado Champions; the lender documents your service |
| First-time or first-generation buyer in a Prop 123 area | Colorado Roots, at 50% to 120% of area median income |
| Business based in a resort county | Local deed-restricted homes and county funds; see below |
Income caps: $178,920 for HFA1, SmartStep, Preferred and Schools To Home. $196,810 for Champions. metroDPA's FHA, VA and USDA tier goes to $216,000. Pikes Peak DPA is $178,920 for government loans and $92,560 for its Freddie Mac option.
The file a lender will build
All three agencies treat you as self-employed if you own 25% or more of a business. A Schedule C sole proprietor owns 100%. Expect to provide:
- Personal returns, two years, with every schedule. Lenders can use IRS transcripts with a signed Form 4506-C instead of signed copies.
- Business returns, two years, if you file them. FHA can waive these when personal returns show rising income and closing funds do not come from business accounts.
- A year-to-date profit and loss statement. FHA requires one, plus a balance sheet for non-Schedule C businesses, once more than a calendar quarter has passed since your tax year ended. Fannie Mae may ask for one more than 120 days after year-end.
- Proof the business exists. Freddie Mac wants third-party verification within 120 days before closing, such as a license or CPA letter.
Fannie Mae and Freddie Mac accept one year of returns if you have owned at least 25% of the same business for five years.
Worked example: a hail-repair roofer in Colorado Springs
Figures are illustrative. Hail seasons vary, and so does roofing income. This owner files Schedule C.
| Line | Two years ago | Last year |
|---|---|---|
| Net profit | $71,000 | $54,000 |
| Add back depreciation (truck, equipment) | $6,000 | $7,000 |
| Adjusted income | $77,000 | $61,000 |
Averaged, that is $69,000. FHA takes whichever is smaller, the average or the latest year, so it counts $61,000, about $5,083 a month. The drop is about 21%. Under FHA's automated system, a decline over 20% sends the file to manual underwriting. Fannie Mae requires a written trend analysis. Freddie Mac requires the lender to justify that income will likely last three years.
What helps: year-to-date numbers showing a rebound, signed contracts for next season, and a short letter explaining the slow year. What does not help: adding back costs the agencies do not allow. On Schedule C, FHA and Fannie Mae add back depreciation, depletion, amortization, business use of home and casualty losses. Fannie Mae also subtracts nonrecurring income.
At CHFA's 55% debt-to-income ceiling for 660+ scores, $5,083 a month supports about $2,796 in total monthly debts, house payment included. Test your own figures in the affordability calculator.
Time in business required
| Agency | Standard | Shorter history allowed when |
|---|---|---|
| FHA | 2 years | 1 to 2 years, with 2 prior years in the same or related work |
| Fannie Mae | 2 years | Returns show 12 full months from this business, and you earned as much before in similar work |
| Freddie Mac | 2 years | Combined 2-year history with a similar prior job, and returns show at least 1 year of self-employment |
A roofer who worked two years as a W-2 crew lead before going out alone fits the FHA and Fannie Mae paths. VA and USDA self-employment rules were not verified here; your lender confirms.
S corporation and partnership owners
Fannie Mae counts S corporation income only if your distributions match the K-1 income or the business shows enough liquidity. A current or quick ratio of 1 or more is "generally sufficient." Freddie Mac does not count K-1 cash distributions as qualifying income. If you pay yourself a W-2 salary from your own company, that wage is part of the same self-employed review.
Working for yourself in a mountain county
Resort-area affordable homes often require local work hours. Summit County's deed restriction guidelines let self-employed owners qualify when the business is based in and serves the county, needs them on site, and earns at least minimum wage. The county must approve it in writing. Pitkin County's APCHA counts 1,500 hours of local work a year. Bring client invoices or job addresses that show where the work happens. Read the mountain-town guide for each county's rules.
Bank-statement loans
A bank-statement loan qualifies you on deposits. Federal ability-to-repay rules allow it because bank records are a reliable third-party source. These are usually non-QM loans. CHFA's help pairs only with its own FHA, VA, USDA-RD or conventional first mortgages, and local programs mostly do the same. Choosing a bank-statement loan usually means giving up the assistance. Decide before you file next year's return, since big write-offs lower the income agency lenders can use.
Twelve-month prep calendar
- Month 12: separate business and personal bank accounts.
- Month 9: ask a lender to run last year's return the way underwriting will.
- Month 6: talk to your tax preparer about the trade-off between deductions and qualifying income.
- Month 3: take the CHFA homebuyer class. Every borrower needs it.
- Month 1: prepare a year-to-date profit and loss statement and your business license.
When the file is ready, check your eligibility and ask for a loan officer who handles self-employed CHFA loans often.
Questions
Can a self-employed person get CHFA down payment help?
Yes. HFA1, SmartStep and Preferred accept any occupation with qualifying income up to $178,920. Schools To Home and Colorado Champions need a qualifying school or first responder role on the loan.
How do lenders figure self-employed income?
They start with net profit, add back non-cash items such as depreciation, and average two years. FHA uses the lower of the two-year average or the latest year.
What if my business income dropped last year?
Expect extra review. Under FHA's automated system, a drop over 20% means manual underwriting. Fannie Mae requires a trend analysis, and Freddie Mac requires the lender to justify that income will continue.
Will a bank-statement loan work with CHFA or local help?
Usually not. CHFA and most local programs require their own agency first mortgage, and bank-statement loans are typically non-QM.
Does self-employment count for Summit County's work requirement?
It can, if the business is based in and serves the county, needs you there in person, and earns at least minimum wage. The county must approve it in writing.
Find out what you qualify for
Six questions, no credit check. A lender used to self-employed and app-based income follows up.
Start the eligibility check