Can a self-employed Texan qualify for a mortgage without two years of tax returns?
Texas has one of the largest self-employed and contractor workforces in the country. If your tax returns understate what you really earn, bank-statement and 1099 loan programs let you qualify on your actual cash flow — no two years of returns required.
Why tax returns fall short for the self-employed
Smart business owners write off every legitimate expense, which lowers the taxable income on their returns — and that's exactly the number a traditional mortgage uses. The result: a profitable Texas business owner can look like they earn far less than they actually take home. Bank-statement and 1099 programs solve that by qualifying you on real cash flow instead of your adjusted gross income.
How bank-statement loans work
Instead of tax returns, the lender reviews 12 or 24 months of business or personal bank statements and averages your deposits. Critically, it does not count 100% of those deposits as income. The lender applies an expense factor — an assumed business-expense percentage — so only a portion of deposits counts. The expense factor varies by business type; a service business with low overhead is treated differently than one with high costs.
| Path | What you document | Good fit for |
|---|---|---|
| Bank-statement | 12–24 months of deposits (expense factor applied) | Owners whose returns understate income |
| 1099 | 1099 income, often with an expense factor | Independent contractors paid on 1099 |
| Profit-and-loss | CPA-prepared P&L plus support | Established businesses with clean books |
These are still fully documented loans. You verify business ownership, provide statements, and show reserves — they're an alternative documentation path, not a no-questions-asked loan.
The Texas angle
Texas has no state income tax return, which leads a lot of self-employed Texans to assume mortgage qualifying will be a nightmare. It isn't — federal returns still exist, and bank-statement and 1099 programs are designed for owners whose documented income doesn't reflect reality. The bigger Texas variable is on the payment side: high property taxes drive your debt-to-income ratio, so how we structure the loan around your tax escrow matters. See how Texas property tax shapes affordability.
What to prepare
- 12 or 24 months of business and/or personal bank statements.
- Proof of business ownership and time in business (often two years).
- Reserves — a few months of payments in savings strengthens the file.
- A sense of your real expense ratio, so we pick the right program.
Common questions
Can I get a Texas mortgage without tax returns if I'm self-employed?
Yes. Bank-statement and 1099 loan programs let self-employed Texans qualify on cash flow instead of tax returns. They're full-documentation alternatives — you still verify business ownership, deposits, and reserves — not no-doc loans.
How is bank-statement income calculated?
The lender averages 12 or 24 months of deposits and applies an expense factor, so only a portion of your deposits counts as income — not 100%. The factor depends on your business type and overhead. This estimates your true take-home income.
Do bank-statement loans count all my deposits as income?
No. A business-expense factor is subtracted first, so only part of your deposits is treated as qualifying income. A low-overhead service business is treated more favorably than a high-cost operation.
Does Texas having no state income tax affect self-employed qualifying?
Not directly — federal returns still exist and bank-statement or 1099 programs work the same way. The bigger Texas factor is high property tax, which is counted in your monthly payment and debt-to-income, so the payment structure matters.
How Mike + Cornerstone help
We match self-employed Texas buyers to the right documentation path — bank-statement, 1099, or P&L — and pick the expense factor that reflects your business, then structure the loan around Texas property tax so your approval holds together. Bank-statement income is calculated with an expense factor, never 100% of deposits.
Talk to Mike first Get pre-approved
No pressure, no commitment. Free 20-minute consult. Mike will look at your scenario and tell you straight whether this works for you.
This article is general information for Texas homebuyers and homeowners, not financial or legal advice, and is not a commitment to lend. Program figures are current as of June 28, 2026 and can change; we confirm the numbers for your specific situation. Equal Housing Lender.