As year-end approaches, many self-employed borrowers start focusing on their books and preparing for tax season — but that same timing also brings a critical opportunity for mortgage professionals. Before clients close out their financial year, brokers can help them assess whether a refinance makes sense now or if waiting until after tax filing could hurt their eligibility.
For borrowers who rely on traditional income documentation, year-end planning can make or break loan qualification. Once new tax returns are filed, higher deductions or lower net income may reduce how much they can borrow. Acting now, before those filings are complete, allows brokers to lock in stronger income figures and smoother approvals.
Meanwhile, for borrowers who prefer to avoid tax-return underwriting altogether, Non-QM programs such as Bank Statement, 1099, or P&L loans provide a simpler, common-sense path. These programs look at cash flow instead of taxable income — offering flexibility for self-employed professionals who don’t want their next refinance caught in the post-tax-season backlog.
In short, pre-tax-season planning is about timing and strategy: helping borrowers choose the right documentation approach now — before lenders are flooded with filings, verifications, and delayed approvals in the months ahead.
The Self-Employed Challenge: Income Documentation
For mortgage professionals, self-employed clients are often some of the most rewarding — and the most complex — borrowers to serve. Entrepreneurs, independent contractors, and small business owners may appear highly qualified on paper, yet their income documentation can present unexpected challenges when it comes to refinancing.
The issue lies in how income is represented, not how it’s earned. Many self-employed clients have strong cash flow and healthy business margins, but their tax filings don’t reflect that stability. By maximizing deductions to reduce taxable income, they may appear to earn less than they actually do — a strategy that works well for taxes but not always for conventional underwriting.
Under traditional guidelines, lenders rely on Adjusted Gross Income (AGI) from tax returns to calculate the debt-to-income (DTI) ratio. That means every deduction — from mileage to equipment[JHR1] — directly impacts how much a borrower can qualify for. A client who grosses $250,000 annually but deducts $170,000 in business expenses may show only $80,000 in taxable income, shrinking their eligibility or disqualifying them altogether.
This is where brokers can make a real difference by identifying the right documentation path before the next tax filing resets the clock. For clients who plan to use tax returns for qualification, refinancing before filing new returns preserves higher income figures and broader loan options.
For others, the better route may be Non-QM programs that recognize real-world earning power without relying on tax returns at all. Programs such as Bank Statement, P&L, or 1099 Loans calculate income using deposits, receipts, or verified business performance — giving brokers more flexibility to help their self-employed clients refinance on terms that reflect their true financial picture.
In short, understanding how each client’s income is documented — and anticipating how year-end tax strategies may affect their qualification — allows brokers to deliver proactive, common-sense guidance at a time when it matters most.
Why Year-End Timing Matters
For brokers, the months between November and early January present a valuable window to help self-employed clients get ahead of tax season — and ahead of the competition. As tax planning ramps up, many borrowers are focused on deductions and write-offs, not realizing how those adjustments can reshape their qualifying income. A well-timed refinance strategy can protect their eligibility and position brokers as trusted advisors who understand both the lending and financial sides of the equation.
Here’s how timing can work to a client’s advantage — and how brokers can use it to strengthen their pipeline before tax season begins:
Here’s why timing is everything:
1. Preserve Borrowing Power Before Tax Filings Reset the Clock
Once new tax returns are filed, lenders are required to use the most recent version for income verification. If a client increases deductions or reports lower net income, their qualifying power may drop immediately.
By encouraging clients to refinance before filing, brokers help them lock in stronger documented income and maintain access to higher loan amounts or better pricing — especially for conventional or agency loan types that depend on tax returns.
2. Streamline Processing Before the Seasonal Backlog[JHR2]
Every spring, lenders face a surge in loan volume as new tax returns flood the system and verification timelines slow down. By initiating refinance files before this peak, brokers can avoid the inevitable underwriting bottlenecks and ensure faster approvals and smoother closings.
Positioning refinancing as a strategic timing decision — not just a rate play — can help clients appreciate the value of acting early and help brokers maintain steady production during the winter months.
3. Use Non-QM as a Parallel Track for Flexibility
Not every client needs to wait for tax filings or depend on them. Brokers can leverage Non-QM programs such as Bank Statement, P&L, and 1099 loans to serve clients who prefer a streamlined qualification path based on cash flow rather than taxable income.
Promoting these options before the post-tax-season rush allows brokers to close more loans quickly — and gives self-employed borrowers an easier, documentation-light route when time and timing matter most.
4. Help Clients Navigate Rate and Market Shifts
Mortgage markets tend to move around year-end as investors rebalance portfolios and anticipate Federal Reserve policy changes. Helping clients act now — while conditions remain stable — allows brokers to lock favorable terms before potential rate volatility in early spring.
Even modest rate changes can significantly affect affordability, particularly for clients looking to free up business capital or consolidate debt through refinancing.
Example in Practice
Consider a self-employed client who earned $180,000 in 2024 but increased deductions in 2025 will reduce taxable income by $40,000. If that client refinances before filing the new return, they can qualify based on the higher income figure — potentially securing a more competitive rate or a larger loan amount. Waiting until after filing with reduced qualifying income at $140,000, will tighten DTI ratios and may limit options.
For brokers, timing this discussion early can mean the difference between a smooth approval and a post-filing scramble. Acting before tax season gives clients clarity — and brokers consistency in their pipeline during an otherwise unpredictable time of year.
Why Flexibility Matters
Non-QM programs empower brokers and borrowers to work together on solutions that make sense in the real world:
- No income “box” to fit into. Borrowers can qualify based on deposits, gross receipts, or other verifiable cash flow sources.
- Faster approvals. Without the back-and-forth of tax transcript verification, loans can close quickly — a major benefit during year-end refinancing.
- Higher loan potential. Evaluating gross cash flow rather than taxable income often leads to larger approved loan amounts and better pricing.
- Business-friendly mindset. These programs understand that writing off expenses is not financial weakness — it’s sound business management.
This borrower-first approach is especially important for professionals like real estate agents, consultants, restaurateurs, or small business owners who often reinvest profits, pay themselves variably, or operate through LLCs.
Example in Action
Consider a graphic designer who owns her own studio. She brings in roughly $200,000 annually, but after legitimate business deductions — software subscriptions, office rent, and marketing expenses — her 2024 tax return shows only $120,000 in taxable income.
Under a conventional loan program, that lower figure would be used to determine eligibility, significantly limiting her refinancing options or increasing her debt-to-income ratio.
But with a Bank Statement Loan, the lender analyzes 12 to 24 months of deposits into her business or personal accounts. Those deposits tell the real story: strong, steady cash flow and consistent earnings. By using this method, the borrower may qualify closer to her true gross income, allowing her to refinance into a lower payment, free up cash flow, or access equity — all without waiting for the next tax season.
If she waits until after filing new tax returns with additional deductions, her reported income may decrease even further, reducing her borrowing capacity. By refinancing now, she locks in terms that reflect her business at its strongest — a move that’s both strategic and financially sound.
The Bigger Picture
Non-QM loans aren’t just about exceptions — they’re about evolution. As the modern workforce shifts toward entrepreneurship, gig work, and flexible employment, lending must evolve alongside it. Non-QM programs represent that evolution, offering a fairer, more realistic approach to credit evaluation that aligns with today’s economic landscape.
For brokers, this flexibility is an opportunity to reach new markets and serve clients who traditional lenders overlook. For borrowers, it’s the key to turning hard-earned cash flow into long-term financial security — a perfect example of common-sense lending built on a rock-solid Foundation.
How Brokers Can Prepare Self-Employed Clients for Year-End Refinancing
For Helping self-employed clients prepare for a refinance before tax season isn’t just about seizing a short-term opportunity — it’s about positioning them for smoother approvals and stronger loan terms year-round. As a broker, your expertise in timing, documentation, and product selection can make all the difference between a deal that closes quickly and one that stalls under new income calculations.
Here’s how to guide your clients through a smart, structured year-end strategy:
1. Review Each Client’s Financial Picture Before the Books Close
Encourage clients to connect with their accountants early to review year-to-date income, expenses, and planned deductions. This helps determine whether refinancing before filing makes sense.
If a client’s taxable income is likely to decrease once new deductions are applied, acting now could preserve eligibility for higher loan amounts or better pricing. If their income is stable or growing, you’ll have the advantage of using current documentation that supports consistent cash flow and repayment capacity.
2. Organize Documentation in Advance
Preparation is everything. Remind clients that the type of income documentation required will depend on the program — and that having it ready in advance can save weeks during processing.
For traditional loans, this may include:
- Prior-year tax returns
- Year-to-date P&L statements
- Business license verification
For Non-QM options, help clients gather:
- 12–24 months of personal or business bank statements
- CPA-prepared P&L statements for cash-flow analysis
- 1099 forms for contractors or commission earners
By anticipating documentation needs, you not only keep files moving efficiently but also build trust by demonstrating process transparency and organization.
3. Run Credit and Equity Checks Early
While Non-QM loans emphasize flexibility in income, credit history and collateral value still drive loan pricing and structure. Running soft-pull credit checks and assessing value in late Q4 helps identify potential hurdles early.
This also gives borrowers time to correct reporting errors, pay down revolving balances, or prepare for an updated appraisal before year-end — all of which improve loan outcomes and shorten cycle times once the refinance is underway.
4. Define the Borrower’s Objective
Each refinance opportunity should begin with a clear, measurable goal. Use this time to help clients articulate why they’re refinancing and what success looks like. Common goals include:
- Lowering payments to improve monthly cash flow
- Consolidating high-interest business or personal debt
- Pulling equity to reinvest in business operations or real estate
- Switching from an adjustable-rate to a fixed-rate product for stability
When clients understand their refinancing purpose, brokers can better match them with the right Non-QM or traditional product — and structure a loan that aligns with their broader financial strategy.
5. Move Before the Tax-Season Bottleneck
By initiating files before mid-January, brokers help clients avoid the annual underwriting slowdown caused by new tax filings and verification backlogs. Acting early ensures faster turn times and protects borrowers from potential eligibility changes once new returns are submitted.
It also gives brokers a competitive advantage. Rather than waiting for the spring rush, you can maintain steady volume through the winter — positioning yourself as the go-to expert for self-employed borrowers looking for common-sense refinancing solutions.
6. Coordinate with the Client’s CPA
Encourage clients to loop in their accountant before filing, especially if a refinance is already in motion. Coordinating with the CPA ensures that income documentation remains consistent throughout the process and prevents inadvertent discrepancies once the new return is submitted.
A quick three-way conversation between the broker, borrower, and accountant can eliminate surprises, avoid compliance issues, and demonstrate the high level of professionalism clients expect from their lending partner.
Bottom Line
When brokers guide clients through this pre-tax-season checklist, they deliver more than just a loan — they deliver foresight. Early preparation preserves borrowing power, streamlines underwriting, and helps self-employed borrowers start the new year on stable financial ground.
By pairing thoughtful timing with flexible Non-QM programs, brokers can show exactly what common-sense lending built on a rock-solid Foundation looks like in action.
The Non-QM Advantage: Flexibility for Real-World Income
For mortgage brokers, the Non-QM space continues to be one of the most effective tools for helping self-employed clients refinance without the friction of tax-return underwriting. These programs were built specifically to serve borrowers who may not fit traditional molds but demonstrate strong, stable cash flow — and they allow brokers to say “yes” where conventional channels often say “no.”
Rather than focusing on adjusted gross income (AGI) from tax returns, Non-QM programs evaluate how money actually moves through a borrower’s accounts. That flexibility gives brokers more options to match loan structure with real-world income documentation.
Common documentation alternatives include:
- Bank Statement Loans: 12 or 24 months of personal or business deposits establish an average monthly income, revealing consistent earning patterns without relying on tax deductions.
- P&L Loans: A CPA-prepared Profit & Loss statement illustrates business performance and cash flow, ideal for small-business owners with clean books and reinvested profits.
- 1099 Programs: Designed for independent contractors and commission-based professionals whose income may come from multiple clients or sources.
This approach eliminates the biggest pain point in traditional underwriting — the disconnect between taxable income and true earning power. It also shortens processing timelines by removing the need for IRS transcript verification, making it a valuable path for borrowers who want to close before the post-tax-season backlog begins.
Positioning the Value for Brokers
For originators, Non-QM flexibility translates to:
- Broader borrower reach: Capture clients who are self-employed, recently incorporated, or recovering from one-time credit events.
- Year-end opportunity: Re-engage past clients who couldn’t qualify conventionally earlier in the year.
- Pipeline diversification: Balance conventional seasonality with steady Non-QM demand through Q4 and Q1.
- Client loyalty: When brokers offer practical solutions — not obstacles — clients remember who solved the problem.
Ultimately, Non-QM lending lets brokers tell a better story: one that focuses on the borrower’s capacity to repay, not their ability to navigate complex tax code. It’s a modern reflection of what the industry was built on — common-sense lending that meets borrowers where they are.
Common-Sense Lending in Practice
For brokers, success in today’s market comes down to perspective: viewing each file not as paperwork, but as a story of cash flow, discipline, and opportunity. Common-sense lending is the bridge between those stories and the loan products that make them possible.
As self-employed clients prepare for year-end, the best strategy is proactive engagement. Reach out before tax season hits to review documentation, discuss timing, and identify whether a traditional or Non-QM path best fits their financial picture. By doing so, you position yourself as a trusted partner — not just a rate provider.
At Foundation Mortgage, common-sense lending isn’t a tagline; it’s a philosophy. It means evaluating borrowers based on real income patterns, realistic underwriting, and responsible credit behavior — not narrow, one-size-fits-all criteria. Brokers who embrace this mindset can close more loans, deepen client trust, and grow business through relationships rather than rate sheets.
As the new year approaches, timing and execution are everything. Helping clients refinance before tax season — or guiding them toward Non-QM options that remove tax returns from the equation entirely — showcases exactly what sets a broker apart in a crowded marketplace: insight, adaptability, and a rock-solid Foundation built on common-sense lending.
Help your self-employed clients get ahead of tax season.
Explore Non-QM refinance options that reflect real income — not just what’s on paper. Contact Foundation Mortgage today to learn how our common-sense programs can make year-end planning a success.
