Key Takeaways
- Some lenders offer HELOCs for self-employed borrowers using alternative income verification instead of W-2s.
- Most lenders require two years of personal and business tax returns, profit-and-loss statements, and 12–24 months of bank statements.
- Most lenders require a credit score of at least 620 to 680, and usually set a maximum combined loan-to-value between 80 and 85%.
Running a business and getting approved for a HELOC are different challenges. If your tax returns show lower income because of legitimate deductions, your bank statements might better reflect your true financial health.
Lenders now have other ways to verify income, like bank statement programs and asset-based options, which look beyond just your tax returns. This guide covers what documents you need, outlines HELOC programs for self-employed people, and helps you find a lender that fits your needs.
In this article (Skip to...)
- Self-employed HELOCs
- HELOC income verification
- Bank-statement HELOCs
- No-doc HELOCs
- HELOC requirements
- Qualifying for self-employed HELOCs
- FAQ
Can you get a HELOC if you're self-employed?
Yes, you can get a HELOC if you’re self-employed, provided you meet the lender’s income and equity requirements. The main challenge is income verification, since self-employed borrowers don’t have W-2s or pay stubs. Some lenders use tax returns, while others offer bank statement programs that emphasize cash flow over taxable income. In limited cases, lenders may approve no-doc HELOCs for borrowers with strong credit and substantial equity.
Compare HELOCs with multiple lenders. Start here
How lenders verify self-employed income for a HELOC
W-2 employees simply provide pay stubs for income verification. However, self-employed borrowers undergo a more detailed process, as lenders require evidence of consistent income for at least 2 years.
1. Tax returns and business schedules
Most lenders want two full years of personal and business tax returns, including all schedules. Sole proprietors provide Schedule C, while S-Corp owners provide their K-1 and the business’s 1120S. Lenders usually average your net income from both years to calculate qualifying income. If you made a lot more in the second year, some lenders might give that year more weight, but it’s not always guaranteed.
Check your eligibility for a self-employed HELOC. Start here2. Profit and loss statements
A year-to-date profit and loss statement bridges the period between your last tax return and the present. Many lenders require this document to be prepared by a CPA or licensed bookkeeper, rather than accepting a self-prepared version. The P&L shows your current income and expenses, helping the lender see that your business is still doing well since your last tax return.
3. 1099 income documentation
Freelancers and independent contractors often receive 1099-NEC or 1099-MISC forms from clients. These forms document gross payments and help substantiate the income figures on your application. Note that 1099 forms reflect gross income before expenses, but lenders usually qualify you based on your net income after deductions.
4. CPA or accountant verification letters
Some lenders accept a letter from your CPA or accountant as supplemental documentation. This letter typically confirms your income level, verifies your business is operational, and may explain any unusual fluctuations in earnings. While an accountant’s letter rarely replaces tax returns, it can bolster an application that’s on the edge.
What is a bank statement HELOC?
A bank statement HELOC is a loan program designed specifically for self-employed borrowers. Instead of relying on tax returns, lenders use your bank deposit history to verify income. Bank statement HELOCs are particularly useful for those whose business deductions reduce taxable income below their actual cash flow.
Compare your HELOC options with multiple lenders. Start hereHow do lenders calculate bank statement income?
Lenders review your deposits over 12 to 24 months and apply an expense factor to determine qualifying income.
- Personal bank statements: Lenders may count 80–100% of deposits as qualifying income, depending on the source.
- Business bank statements: Lenders subtract an expense ratio, often 50% or higher, from total deposits to account for business costs. The remainder counts as income.
For example, if your business account shows $20,000 in monthly deposits and the lender applies a 50% expense factor, your qualifying monthly income would be $10,000.
Who qualifies for bank statement HELOC programs?
Bank statement HELOCs work well for business owners who have high cash flow but significant tax write-offs, or for people whose income is irregular and not shown in tax returns. You still need to meet credit score, home equity, and debt-to-income requirements. These programs often make it easier for self-employed people to qualify based on their income.
How common are bank statement HELOCs?
Not every lender has bank statement programs. They are more common at portfolio lenders, credit unions, specialty HELOC lenders, or non-QM mortgage companies. When you look for a HELOC, ask if the lender offers bank statement options for self-employed borrowers.
No-doc and stated income HELOC options
No-doc and stated-income HELOCs require less paperwork than traditional loans. They are less common since the 2008 financial crisis, but some lenders still offer them to qualified borrowers.
Check your eligibility for a self-employed HELOC. Start hereHow no-doc home equity lines work
A no-income-verification HELOC does not mean you do not have to qualify. Instead, lenders look at other things:
- Higher credit scores: Often 700 or above
- Significant home equity: Lower maximum LTV limits than standard programs
- Substantial liquid assets: Verified savings, investments, or retirement accounts
These programs require less paperwork, but the qualification requirements are stricter.
Asset-based HELOC qualification
Asset-based lending, also called asset depletion, lets you qualify using your liquid assets instead of income. The lender calculates a hypothetical monthly income by dividing your assets by a set number of months.
For example, if you have $500,000 in liquid assets, dividing that by 360 months gives about $1,389 in monthly income. This method works well for retirees or people with a lot of savings but an irregular income.
Rate and LTV tradeoffs for no income verification HELOCs
If you choose a no-doc or stated-income program, expect stricter terms because lenders see these loans as riskier.
| Documentation Type | Typical Rate Impact |
| Full documentation (tax returns) | Standard market rates |
| Bank statement program | Slightly higher rates |
| No-doc or stated income | Higher rates to offset lender risk |
These loans usually have lower loan-to-value limits, so you can borrow less from your home’s value.
HELOC requirements for self-employed borrowers
In addition to income verification, self-employed individuals must meet the same basic requirements as W-2 borrowers. Lenders look at your whole financial picture, not just your income.
Compare HELOCs with multiple lenders. Start here- Minimum credit score: Most HELOC lenders want a credit score of 680, but some accept scores as low as 620. A higher score can help if your income documentation is weak and usually yields better rates.
- Home equity and combined loan-to-value limits: Combined loan-to-value, or CLTV, measures your total mortgage debt against your home’s value. Most lenders cap CLTV at 80–85%, meaning you’ll retain at least 15–20% equity after opening the HELOC. For example, if your home is worth $400,000 and you owe $250,000 on your first mortgage, your maximum HELOC at 80% CLTV would be $70,000.
- Debt-to-income ratio: Your debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. For self-employed people, lenders use your net income after business deductions rather than gross revenue. Because of this, many self-employed people appear to have lower income on paper, which can make it harder to meet the debt-to-income ratio.
- Self-employment seasoning requirements: Most lenders require at least 2 years of self-employment history on your tax returns. Some may accept less if you have excellent credit, a low DTI, or significant assets.
How to qualify for a self-employed HELOC
1. Review your financials and tax situation
Begin by looking over your last two years of tax returns. Calculate your average net self-employment income and compare it to your actual cash flow. If business write-offs significantly reduce your taxable income, a bank statement program may be more suitable than a standard HELOC.
2. Organize your income documentation
Collect your documents before you apply to expedite the process. You’ll need:
- Two years of personal and business tax returns (all pages and schedules)
- Year-to-date profit and loss statement
- Business license or registration
- 12–24 months of personal and business bank statements
- Any 1099 forms received
3. Compare HELOC lenders for self-employed borrowers
Lender requirements vary dramatically. Some specialize in self-employed borrowers, while others have rigid documentation rules. Compare multiple lenders, including national banks, local credit unions, and portfolio lenders that may offer more flexible programs.
4. Get prequalified to confirm eligibility
Prequalification lets you check if you meet a lender’s basic requirements before you fill out a full application and undergo a hard credit inquiry.
Check your eligibility for a self-employed HELOC. Start hereWill you pay higher rates with a self-employed HELOC?
For HELOCs that use full tax return documentation, self-employed people usually get the same HELOC rates as W-2 employees. Your rate depends on your credit score, equity, and the market, not your job type. However, alternative documentation programs often carry higher rates. Bank statement programs may add 0.25–0.75% to your rate, while no-doc options can add 0.5–2% compared to fully documented loans.
Alternatives if you cannot qualify for a HELOC
If you cannot get a HELOC, there are other ways to use your home equity or get the cash you need.
Compare HELOCs with multiple lenders. Start here- Home equity loan: A home equity loan provides a lump sum at a fixed rate with predictable monthly payments. The same income verification challenges apply, but some borrowers prefer the stability of fixed costs over a HELOC’s variable rate.
- Cash-out refinance: A cash-out refinance replaces your existing mortgage with a larger one, giving you the difference in cash. This option affects your primary mortgage rate, which may not be ideal if you currently have a low rate locked in.
- Home equity investment: A home equity investment, or HEI, provides cash in exchange for a share of your home’s future appreciation. There are no monthly payments or income requirements, making HEIs accessible for self-employed borrowers who can’t document sufficient income for a loan.
- Personal loan: An unsecured personal loan does not require home equity, but it usually has higher rates and lower borrowing limits than home equity loans.
Find the right HELOC lender for your self-employment situation
Self-employed people have several ways to get approved for a HELOC. The main thing is to find a lender whose programs fit your situation. If one lender says no, do not get discouraged. Requirements vary everywhere, so you can find the right match.
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FAQs about HELOC income verification for self-employed borrowers
Most lenders require at least two years of self-employment history documented through tax returns. Some may accept shorter terms with strong compensating factors, such as excellent credit or significant home equity.
Yes, lenders can combine W-2 income with self-employment income. You'll provide standard documentation for your W-2 job (pay stubs) alongside self-employment documentation (tax returns or bank statements) for the business income.
A business loss reduces your overall qualifying income and may disqualify you from traditional HELOC programs. A bank statement HELOC, which focuses on actual cash flow rather than taxable income, may still be viable.
Yes, asset-based or asset-depletion programs allow borrowers with substantial investments, retirement funds, or savings to qualify by converting assets into imputed monthly income.
No. Bank statement and no-doc programs are most common at portfolio lenders, credit unions, and specialty mortgage companies, rather than large national banks. Be sure to ask about availability when exploring your options.
