Business owners & 1099 earners · Louisiana
Self-employed in Louisiana: buying a home on 1099 or business income
Louisiana runs on people who work for themselves: offshore contract hands, roofers, caterers, boat captains, stylists. The state's down payment help is open to all of you. What decides the deal is how your tax returns read to an underwriter.
Three Louisiana examples first
Rules make more sense with real-looking numbers. Each example below uses illustrative figures.
1. The storm-season roofer in Lake Charles
Marcus runs his own roofing crew as a sole proprietor. His Schedule C net profit was $48,000 in 2024 and $71,000 in 2025, after a busy storm year.
- FHA compares his two-year average ($59,500) with his latest year ($71,000) and takes whichever is smaller. That's $59,500, about $4,958 a month.
- Freddie Mac requires the lender to justify that a big increase is likely to continue for three years. A one-time storm surge may not count in full.
- Fannie Mae has the lender line up each year against the one before it, for every self-employed file.
Lesson: a great year helps, but lenders lean on the average.
2. The charter captain in Venice whose year went the other way
Danielle's fishing charter netted $60,000 in 2024 and $45,000 in 2025, a 25% drop.
- FHA's automated scorecard can't approve a file where income fell by over 20%. A human underwriter has to review it instead.
- That underwriter may still use her income if a cause beyond her control explains the dip, her earnings have held level or grown for a year or more since, and the smaller number still qualifies her.
Lesson: write down why a bad year happened, and show the months since.
3. The offshore consultant on a 1099
Ray works 14-and-14 hitches as an independent contractor for one operator and gets a single 1099. His expenses are tiny. Freddie Mac will treat contract pay like wages, but only when four boxes are checked:
- his reported business income equals what the 1099s show,
- his costs stay below 5% of that income,
- he sells no inventory, and
- he's been paid this way for 12 months or longer.
If Ray's truck and gear push expenses over 5%, he's underwritten as a business owner instead. Either way, plan on showing two years of 1099 history; Freddie Mac won't go below one year.
Who counts as self-employed
The cutoff is 25% ownership at FHA, Fannie Mae and Freddie Mac alike. Hold 25% or more of a company, or report your work on a Schedule C, and you're a self-employed borrower. That includes the shrimp boat you own with your brother through an LLC, the snowball stand, and the booth you rent at a salon.
How long you need to be in business
Two years is the standard. The exceptions are narrow:
- FHA: 12 to 24 months in business can be enough if you'd already put in two years doing that kind of work, or something close to it, for someone else.
- Fannie Mae: under two years is acceptable when your most recent signed returns cover a whole year of this business, and your earlier pay in similar work was at least as high.
- Freddie Mac: your time in the business and a prior job in the same field have to add up to two years, and at least one full year of business income has to appear on your returns.
A welder who went from a plant payroll to his own welding outfit fits those exceptions far better than a nurse who opened a bakery. VA and USDA have their own rules; your lender confirms them.
What the lender actually reads
The starting point is the profit line after expenses, as filed with the IRS. Sales totals and bank deposits don't count. Then they add back some non-cash deductions. On a Schedule C, both FHA and Fannie Mae add back depreciation, depletion, business use of the home, amortization and casualty losses.
For corporations and partnerships:
- Fannie Mae counts S-corporation income only if your distributions match the K-1 income or the business has enough cash on hand.
- Freddie Mac doesn't let K-1 cash distributions serve as qualifying income by themselves.
Every write-off that cuts your tax bill also cuts the income a lender can use. If you plan to buy next year, talk to your tax preparer about that tradeoff now.
Paperwork to gather
- Your last two federal returns, signed, with all schedules attached
- Business returns if you own a partnership or corporation (FHA can waive these when personal returns show rising income and closing money doesn't come from business accounts)
- A profit-and-loss report for this year so far, if asked. FHA wants one once the tax year has been closed for over three months.
- IRS Form 4506-C, signed, which lets the lender order your tax transcripts
- Proof the business exists, like a license or CPA letter
Five years running the same company? Fannie Mae and Freddie Mac may need only your latest year of returns.
Married buyers and the $125,000 cap
HomeStart Advantage's $125,000 cap counts the projected income of every adult 18 or older in the household, on the loan or not. A spouse's business income counts toward it. A participating lender confirms how LHC projects self-employment income for that test.
Louisiana is also a community property state. On an FHA loan, the lender must pull a non-borrowing spouse's credit and count their debts in your ratios, unless state law excludes them. Plan for that if your spouse carries business debt in their own name.
Which Louisiana programs fit
| Program | Job rule | Notes for business owners |
|---|---|---|
| HomeStart Advantage | None | $125,000 household cap, 640 score, not first-time only |
| HomeStart Assist | None | First-time buyers, parish income limits |
| HomeStart Plus | None | Laura, Delta and Ida parishes, at or under 80% AMI, outside FEMA's high-risk flood zones |
| CAFA First Home | None | Separate first mortgage; 61 parishes outside Orleans and Jefferson |
| City and parish programs | None | Each counts business income its own way; ask the program |
All of them need an FHA, VA, USDA or Fannie/Freddie first mortgage. Bank-statement loans, which look at money flowing into your accounts rather than your returns, are legal under federal ability-to-repay rules, but they're usually non-QM loans. Those generally can't carry state assistance and tend to cost more. Price both if your returns run thin.
To see where your returns put you, check your eligibility. It takes a couple of minutes and doesn't pull your credit.
Questions people ask
Does Louisiana down payment help work for business owners?
Yes. HomeStart Advantage is open to all occupations. You need household income of $125,000 or less and a 640 credit score, and your business income has to qualify for an FHA, VA, USDA or Fannie/Freddie HFA conventional loan.
How do lenders treat a big jump in self-employed income?
Carefully. FHA takes the smaller of your two-year average and your latest year. Freddie Mac requires the lender to justify that a large increase will likely last three years, and Fannie Mae requires a trend review.
What if my business income dropped last year?
If it fell more than 20%, an FHA file needs a human underwriter. The income can still be used when something outside your control caused the dip, earnings have held steady for a year since, and the lower figure still qualifies you.
I'm an offshore contractor paid on a 1099. Am I self-employed?
Usually yes. Freddie Mac will treat contract pay like wages only if your costs stay below 5% of it, you sell no inventory, your reported income equals the 1099s and you've been paid that way for a year. If not, you're reviewed as a business owner.
Do I need two years in business?
Usually. All three agencies make room for less when you did comparable work as an employee before starting out on your own.
