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Self-Employed Less Than Two Years? How Colorado Lenders Can Still Count Your Income

Diane Beaumont · October 21, 2026 · 5 min read
Self-Employed Less Than Two Years? How Colorado Lenders Can Still Count Your Income

Do you really need two years of self-employment to buy a home in Colorado? Not always. Two years is the general rule, but Fannie Mae's guidelines can count a shorter history when your most recent filed tax returns show a full year from your current business and your earlier income was at the same or a greater level, in the same or a similar line of work.

If you left a salaried job to freelance or start a business, you may think the clock reset to zero. It may not have. A lot can depend on which tax return you've filed and what you did before, and the lender also weighs your experience and the business's debt.

Why lenders start with two years

Lenders want to see that your income is likely to keep coming. For self-employed buyers, a track record is how they judge that.

Fannie Mae's Selling Guide section on self-employed borrowers says it generally requires lenders to get a two-year history of prior earnings. Freddie Mac's guide to qualifying when you're self-employed says most lenders require at least two years of consistent self-employment in the same industry.

That's the starting point, not the whole answer.

When less than two years can still count

Fannie Mae's guide says income from less than two years of self-employment may be considered. A few things have to line up first:

  • A full year on your filed returns. Your most recent signed personal and business federal tax returns need to reflect a full year of self-employment income from your current business.
  • Prior income at the same level or higher. The file needs to show you earned at least as much before.
  • The same or a similar line of work. That earlier income should come from a field offering the same products or services, or a job with similar responsibilities.

The lender also has to look carefully at your level of experience and how much debt the business has taken on. So a graphic designer who went freelance may be in a different spot than someone who opened a business in a brand new field. Your lender will need to determine how your file fits.

Freddie Mac's page adds that if you haven't been self-employed for two full years, lenders may accept a W-2 from a previous employer along with your self-employment documents.

Why the tax return you file matters so much

Fannie Mae's test looks at your most recent filed returns, so the timing of your first full year can shape when you're ready to apply.

If your latest return only covers part of a year in business, it may not show the full year the guideline describes. Ask your tax preparer which return will first show a full year from the business, and when you can file it.

There's a second catch. Freddie Mac explains that your debt-to-income ratio is based on your income after expenses. Deducting business expenses can lower your taxable income and your tax bill. But less taxable income could mean a higher debt-to-income ratio on paper. It's worth talking with your tax preparer and a lender before you file, not after.

What to have ready before you apply

Freddie Mac lists income records a self-employed buyer could be asked for:

  1. Two years of personal tax returns
  2. Two years of business tax returns, with their schedules
  3. A year-to-date profit and loss statement
  4. A balance sheet

It also lists documents that can show steady self-employment: letters from current clients, a signed CPA statement, a business license if you own a business, and proof of insurance for your business. If you're newer to self-employment, add the W-2s from your last job so the lender can see your earlier income and line of work. You may not need every item, but having them ready can save time.

FHA, VA and USDA may differ

The shorter history rule above comes from Fannie Mae's guidelines. FHA, VA and USDA loans may treat self-employed income differently, and each lender may add its own requirements. A lender can walk you through each program and what it would ask to see.

Your next step

If you're about a year into your business, start with your tax preparer and your filing date. Then read how pre-approval works in Colorado so you know what comes next, and look over buying with a Colorado mortgage. When you're ready for a read on your own file, take the homebuyer quiz and Diane can help you see where you stand.

Diane also helps buyers in Arizona, Montana and Florida.

Diane Beaumont, Mortgage Loan Originator, NMLS #247026. Benchmark Mortgage, a dba of Ark-La-Tex Financial Services, LLC, NMLS #2143. Equal Housing Lender. Not a commitment to lend.