How to calculate self employed income for mortgage?

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Calculating self-employed income for a mortgage can be a complex process. Unlike salaried individuals who receive a regular paycheck, self-employed individuals have income that can vary from month to month. Lenders typically require proof of stable income to assess the borrower’s ability to repay the mortgage. In this article, we will explore the steps involved in calculating self-employed income for a mortgage and provide useful tips to simplify the process.

Understanding Self-Employed Income

Self-employed income includes any income earned through self-employment, such as freelance work, consulting, or running a business. Lenders typically require self-employed individuals to provide at least two years of tax returns to verify their income. The following steps will help you calculate your self-employed income for a mortgage:

1. Gather Financial Documents

To accurately calculate your self-employed income, start by gathering all the necessary financial documents. These may include your tax returns, profit and loss statements, bank statements, and any other relevant financial records. Having these documents organized and readily available will make the process smoother.

2. Calculate Your Gross Income

The first step in calculating your self-employed income is determining your gross income. Gross income refers to the total income you earn before deducting any expenses. Review your tax returns and identify the total income reported for each year. Add up the income from both years to calculate your average gross income.

3. Determine Your Net Income

After calculating your gross income, the next step is to determine your net income. Net income is the amount left after deducting business expenses from your gross income. Review your profit and loss statements or consult with an accountant to accurately determine your net income. Lenders typically consider the average net income over the past two years.

4. Consider Non-Taxable Income

In some cases, self-employed individuals may have non-taxable income, such as income from rental properties or investments. It’s essential to include this income when calculating your self-employed income for a mortgage. Provide documentation or bank statements to verify the non-taxable income.

5. Prepare a Year-to-Date Profit and Loss Statement

To provide a more up-to-date picture of your self-employed income, prepare a year-to-date profit and loss statement. This statement should include your income and expenses from the beginning of the current year until the present. Lenders may request this statement to assess your recent income trends.

6. Consult with a Mortgage Professional

Calculating self-employed income for a mortgage can be complex, and it’s advisable to consult with a mortgage professional or accountant. They can guide you through the process, ensure accurate calculations, and help you understand the specific requirements of lenders.


Calculating self-employed income for a mortgage requires careful consideration of various factors, including gross income, net income, non-taxable income, and recent income trends. By gathering the necessary financial documents, accurately calculating your income, and seeking professional guidance, you can simplify the process and increase your chances of obtaining a mortgage.


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