If you’re self-employed, 1099, or run income through a business, the first question isn’t “What’s the rate?” It’s “Which lane actually fits how I earn?”
I’m Michael McDermott (NMLS 184065), NEXA Lending / The McDermott Team. This guide walks two paths I use often with self-employed and investor clients in Arizona and my other licensed states: bank-statement programs and DSCR (debt-service coverage) loans. Neither is “stated income.” Neither is “no-doc.” Both have documentation and guidelines — different ones.
Start with the job you’re doing
Primary home or second home you will occupy? Income usually has to be documented somehow — full tax returns when they support the story, or bank-statement averaging when tax returns understate the cash flow the guideline will accept.
Investment property where rent should carry the payment? That’s often a DSCR conversation. The property’s income story matters in a different way than your personal debt-to-income on a primary-residence loan.
Mixing those jobs up is how people waste weeks in the wrong box.
Bank-statement lane (in plain language)
On the bank-statement page, the idea is typically: average eligible deposits over a statement period the investor requires, apply guideline haircuts or expense factors, and use that as qualifying income when tax returns alone don’t tell the whole story.
What it is not:
- Writing in any income number you feel like (“stated income”)
- Skipping documentation (“no-doc”)
- A promise every business qualifies
What we usually walk through: which accounts count, how transfers and large deposits get treated, how long you’ve been self-employed, credit and equity requirements, and whether a different full-doc path is actually cleaner.
If your tax returns already support the purchase comfortably, we may stay in conventional, FHA, VA, or other full-doc lanes. Bank statement is a tool when the returns and the real cash flow diverge — not a flex.
DSCR lane (in plain language)
On DSCR, many investor programs look at whether rental income on the subject property covers the proposed payment at a ratio the investor wants (debt-service coverage). Your personal tax returns may matter less than in a primary-residence full-doc loan — depending on the investor.
What it is not:
- A personal affordability waiver for a primary house
- Guaranteed qualification because “the rent looks fine” on a napkin
- Stated income
We’ll talk lease history vs market rent, vacancy factors, property type (including condo project issues), reserves, and how many financed properties you already have. Investment occupancy purchase paths also sit on investment property.
Which lane first? A simple fork
- You will live in the home; business deposits are strong but returns are messy — lean bank-statement (or full-doc if returns work).
- Investment property; rent needs to carry the loan — lean DSCR.
- You’re buying a primary and an investment — separate conversations; don’t force one program to do both jobs.
- Short-term flip timeline — different tools; see fix-and-flip / hard money — not classic bank-statement primary.
Not all situations qualify. Overlays change. I won’t print a ratio chart that goes stale next month.
Docs people usually gather
Bank-statement conversations often start with recent business and personal bank statements for the period the investor wants, entity docs if any, ID, and a clear picture of how money moves between accounts. DSCR conversations often start with the property address or purchase contract, lease or rent schedule, HOA docs when relevant, and your broader financed-property picture. Exact lists depend on the lender — I’ll tell you what applies instead of handing you a fake universal checklist.
How I work these as a broker
I work as a broker: one application, one credit pull, access to 300+ lenders. I’ll walk you through which guideline set fits your situation — including when the honest answer is “full doc is cleaner” or “this property isn’t a DSCR fit.”
Ready to map it? Apply or Talk. More starting points: Resources & guides. Common questions: homepage FAQ.
Where people get stuck
Common snags: large unexplained deposits, mixing personal and business accounts without a clean story, assuming DSCR will finance a primary residence, or forcing bank-statement guidelines onto a thin deposit history. Another snag is timing — applying for an investment DSCR loan while a primary purchase is mid-stream without planning reserves and credit utilization. None of that means “impossible.” It means we sequence the work and pick the lane that matches the job.
If tax returns already paint a clear, strong picture, we may never need bank-statement. If you’re buying rentals as a business, DSCR may be cleaner than trying to qualify every property on personal DTI. I’ll say which is which in plain English — and when a different specialty path (or waiting) is the honest move.
Bottom line
Self-employed isn’t one product. Bank statement and DSCR solve different problems. Pick the job first; then we pick the lane — with real docs, not slogans.