Self-Employed for Less Than Two Years? Colorado Mortgage Options

If you are looking for a Self-Employed Mortgage Colorado solution but have been in business for less than two years, you are not alone. Many new business owners in Centennial, Lone Tree, Parker, Aurora, Denver, Highlands Ranch, Castle Rock, and across Colorado assume they cannot qualify for a home loan yet. That is not always true.

As a mortgage lender based in Centennial, I regularly help self-employed borrowers understand what is possible, what is required, and how to position themselves for approval.

Why Two Years Matters for Self-Employed Borrowers

Most traditional mortgage guidelines require a two-year history of self-employment. Lenders want to see:

• Two years of personal tax returns
• Two years of business tax returns, if applicable
• Stable or increasing income
• Evidence the business is likely to continue

These guidelines are generally tied to standards set by agencies like Fannie Mae and Freddie Mac, which purchase conventional loans from lenders.

According to the Consumer Financial Protection Bureau, lenders must document a borrower’s ability to repay, and for self-employed borrowers that often means reviewing tax returns carefully.

But here is the good news. Two full years is not always required.

When You May Qualify With Less Than Two Years

There are several scenarios where you may qualify with less than 24 months of self-employment.

You Were in the Same Line of Work Before Going Self-Employed

For prior W-2 employees in the same industry before starting their business, lenders may consider that prior experience. For example:

• A W-2 employee who becomes a 1099 contractor in the same role
• A salaried employee who starts their own company in the same field
• A realtor who moves from working under a brokerage to running their own LLC

In some cases, one full year of self-employment plus prior related experience can meet guidelines.

Strong Income and Clean Financials

When a business has strong documentable income and financials, and the owner has the following, there are more potential options:

• Excellent credit
• Low debt-to-income ratio
• Strong cash reserves
• A solid down payment

With these factors, you may have more flexibility with certain programs.

Bank Statement Loan Programs

For borrowers who write off a significant portion of their income, traditional tax-return-based qualifying may not reflect true cash flow. In these cases, non-QM bank statement loans may be an option.

These programs:

• Use 12 to 24 months of business or personal bank statements
• Do not require tax return income calculation
• Focus on deposits and cash flow instead of net taxable income

While these loans typically have slightly higher interest rates, they can be a strong solution for newer business owners in Colorado.

FHA Loans and Self-Employment

Loans backed by the Federal Housing Administration may allow flexibility in certain cases, particularly when there is strong prior industry experience. FHA loans are especially popular among first-time buyers in markets like Aurora and Denver due to lower down payment requirements.

What Lenders Will Look At Closely

Self-employed for less than 2 years? Expect deeper documentation review. This may include:

• Year-to-date profit and loss statement
• Business bank statements
• CPA letter verifying business existence
• Business license
• Explanation of any declining income

Preparation is key. The earlier we review your documents, the better we can position your file.

Planning Ahead If You Are Close to Two Years

If you are 12 to 18 months into self-employment, it may make sense to:

• Avoid excessive tax write-offs if buying soon
• Keep clean and organized business records
• Separate personal and business accounts
• Maintain strong credit

Small planning decisions can make a major difference in your qualifying income.

Local Insight for Colorado Business Owners

Colorado has seen a significant increase in small businesses and 1099 workers, especially in Centennial, Greenwood Village, and Castle Pines. Many of these borrowers are high earners on paper but show low net income after deductions.

Every situation is different. A self-employed borrower in Parker buying a primary home will be evaluated differently than a real estate investor in Denver purchasing a rental property.

That is why it is critical to talk with a lender who regularly works with self-employed borrowers and understands how to structure these files correctly.

Let’s Review Your Situation

If you have been self-employed for less than two years and want to explore your options in Centennial or anywhere in Colorado, let’s have a conversation.

We can review:

• Your time in business
• Your tax returns
• Your bank statements
• Your credit profile
• Your down payment options

Even if you are not quite ready, you will walk away with a clear plan.

Contact Choice Mortgage Group - RJ Baxter Team at (303) 670-0137 or email rbaxter@choicemortgage.com

You can also find more Colorado mortgage education on our blog page: https://www.cohomesandloans.com/blog

Self-Employed Mortgage Colorado FAQ

Can I get a Self-Employed Mortgage Colorado loan with only one year in business?
Possibly. If you have prior experience in the same industry and strong financials, some loan programs may allow approval with one year of self-employment.

What documents are required for a Self-Employed Mortgage Colorado application?
Most lenders will require personal and business tax returns, profit and loss statements, and bank statements. Some programs may use bank statements instead of tax returns.