A straight answer
Will a mortgage lender count my S-corp income or just my W-2 salary?
The direct answer
Yes, I offer mortgages for S-corp owners that count more than the W-2 salary you pay yourself. On a loan sold to Fannie Mae, your share of the business income on the K-1 counts alongside the wage once the lender verifies distributions or business liquidity.
I'm Zach von der Linden (NMLS 1652805), a mortgage broker with West Capital Lending, based in San Clemente. I put the financing together, and I tell you plainly which program fits. I work with homeowners in California, Utah, Oregon and Arizona.
Zach von der Linden, mortgage broker and Branch Manager, West Capital Lending · NMLS 1652805
Wholesale pricing · California, Utah, Oregon and Arizona
5.0 across 66 reviews on Experience.com (read on 2026-09-24) · Text reaches Zach directly · Last updated 2026-10-19
S-corp owner? Text me your W-2 salary, what the K-1 shows, your ownership share and whether you are buying or refinancing.
This situation is worked out in a short conversation. No credit pull happens from a conversation. The options check is a soft credit pull with no impact on your credit score for the first look. Texts go to Zach's cell.
What are the three parts of S-corp income?
The IRS says S corporations "elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes" (IRS, S corporations).
The IRS also says an S corporation "must pay reasonable compensation to a shareholder-employee" before it makes non-wage distributions to that owner.
So the W-2 wage is one part.
Your share of the business income on the K-1 is the second part.
Distributions are the third part: the cash the company actually paid out to you.
Fannie Mae's guide says an owner "may receive income in the form of wages or dividends in addition to their proportionate share of business income (or loss) reported on Schedule K-1" (Fannie Mae Selling Guide B3-3.7-02).
Does my ownership share change the review?
Yes. Fannie Mae treats an owner of a quarter or more of a business as self-employed (B3-3.5-01).
For that owner, the lender runs a business cash flow analysis to "confirm the business income is stable and consistent, and the sales and earnings trends are positive."
The guide adds: "If the business does not meet these standards, business income cannot be used to qualify the borrower."
The same analysis adds back "depreciation, depletion, amortization, casualty losses, and other losses that are not consistent and recurring."
What if my returns still look low after all that?
Then I look at a bank statement loan. I offer loans qualified on 12 months of personal or business bank statements instead of tax returns, using whichever account shows the larger average monthly deposits. Business-account deposits get an expense factor. The bank statement loan page explains the method.
I also offer loans qualified on a prepared profit and loss statement instead of the net income on your returns. The profit and loss page covers that route.
Own the home already and want a line of credit? The self-employed HELOC page covers the bank statement HELOC.
What should I send first?
- Your personal returns for the last two years, with every K-1.
- The company's returns (Form 1120-S) for the same years, if you have them.
- Your W-2s from the company.
- Bank statements that show the distributions landing in your account.
- Your ownership share, and whether anyone else owns part of the company.
- Whether you are buying or refinancing, and the state.
Send documents through the secure process I give you when we talk, not by ordinary text.
Questions people ask next
Does the salary I pay myself count as income?
Yes. Fannie Mae's guide names wages as one form of income an S corporation owner receives, in addition to the K-1 share. The K-1 share is the part with extra conditions.
Should I raise my salary before I apply?
That is a payroll and tax decision for your tax professional. The IRS requires reasonable compensation before non-wage distributions. I read the file as it stands.
My K-1 shows profit I left in the company. Does it count?
Only if the lender verifies that the business has adequate liquidity to support the withdrawal of earnings. A stable history of cash distributions settles the question without that review.
Do I need the business tax returns too?
On a loan sold to Fannie Mae, in some cases. The guide lets a lender waive business returns when you use personal funds for the down payment, closing costs and reserves, you have been self-employed in the same business for at least five years, and your returns show rising self-employment income over the past two years.
Is a bank statement loan an option for an S-corp owner?
Yes. I offer loans qualified on 12 months of personal or business bank statements instead of tax returns. Business-account deposits get an expense factor, and the lender still verifies you can repay.
Does asking about this affect my credit?
A conversation does not pull credit. A full application does.
What clients say
Zach was so easy to work with. He made a stressful situation into a very positive experience for us and did push us one way or another. He listened to what we hoped we could accomplish and made it happen.
Word for word from Experience.com. Read all reviews.
Sources and checked dates
Sources: Confirmed by Zach, October 19, 2026 (9:29 PM PT, via the Chief of Staff) (checked 2026-10-19) · IRS, S corporations (last reviewed June 11, 2026) (checked 2026-10-19) · Fannie Mae Selling Guide, B3-3.7-02, Analyzing Returns for an S Corporation (02/07/2024) (checked 2026-10-19) · Fannie Mae Selling Guide, B3-3.6-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 (05/07/2025) (checked 2026-10-19) · Fannie Mae Selling Guide, B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023) (checked 2026-10-19) · Confirmed by Zach, October 17, 2026 (checked 2026-10-17) · Confirmed by Zach, October 17, 2026 (via the Chief of Staff) (checked 2026-10-17) · West Capital Lending HELOC registration page (referral id omitted here) (checked 2026-09-09).
Show each claim on this page, what it depends on, and the date it was checked (8)
| What we say, and what it depends on | Source | Checked |
|---|---|---|
| Zach offers financing for these self-employed situations: a HELOC to pay off an IRS tax lien; mortgage income for S corporation owners (W-2 wages, K-1 income and distributions); a HELOC to pay off business loans and business credit cards; a divorce buyout for a self-employed homeowner; a DSCR cash-out refinance of a rental qualified on its rent; business funds for a down payment; a HELOC after a drop in self-employed income; combining a spouse's W-2 income with bank statement income; a mortgage when the business pays a debt in the owner's name; seasonal business income; bank statement loans when real business expenses are lower than the expense factor; and a mortgage when a self-employed owner moves a business into California, Utah, Oregon or Arizona. He arranges each as a broker. | Confirmed by Zach, October 19, 2026 (9:29 PM PT, via the Chief of Staff) | 2026-10-19 |
| IRS, S corporations (page last reviewed June 11, 2026): "S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates." IRS, S corporation compensation and medical insurance issues (last reviewed March 3, 2026): "S corporations must pay reasonable compensation to a shareholder-employee in return for services that the employee provides to the corporation before non-wage distributions may be made to the shareholder-employee." | IRS, S corporations (last reviewed June 11, 2026) | 2026-10-19 |
| Fannie Mae Selling Guide B3-3.7-02, Analyzing Returns for an S Corporation (02/07/2024): "A borrower with an ownership interest in an S corporation or LLC may receive income in the form of wages or dividends in addition to their proportionate share of business income (or loss) reported on Schedule K-1." "The borrower's proportionate share of income or loss is based on the borrower's (shareholder) percentage of stock ownership in the business for the tax year as shown on IRS Form 1120S, Schedule K-1." "Business income may only be used to qualify the borrower if the lender obtains documentation verifying that the income was actually distributed to the borrower consistent with the level of business income reflected on Schedule K-1, or the business has adequate liquidity to support the withdrawal of earnings." For an owner of a quarter or more of the business, the lender must perform a business cash flow analysis "to evaluate the overall financial position of the business and confirm the business income is stable and consistent, and the sales and earnings trends are positive. If the business does not meet these standards, business income cannot be used to qualify the borrower." "Items that can be added back to the business cash flow include depreciation, depletion, amortization, casualty losses, and other losses that are not consistent and recurring." | Fannie Mae Selling Guide, B3-3.7-02, Analyzing Returns for an S Corporation (02/07/2024) | 2026-10-19 |
| Fannie Mae Selling Guide B3-3.6-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 (05/07/2025): "If the Schedule K-1 reflects a documented, stable history of receiving cash distributions of income from the business consistent with the level of business income being used to qualify, then no further documentation of access to the income or adequate business liquidity is required." | Fannie Mae Selling Guide, B3-3.6-07, Income or Loss Reported on IRS Form 1065 or IRS Form 1120S, Schedule K-1 (05/07/2025) | 2026-10-19 |
| Fannie Mae Selling Guide B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023): an individual who owns a quarter or more of a business "is considered to be self-employed." "The following factors must be analyzed before approving a loan for a self-employed borrower: the stability of the borrower's income, the location and nature of the borrower's business, the demand for the product or service offered by the business, the financial strength of the business, and the ability of the business to continue generating and distributing sufficient income to enable the borrower to make the payments on the requested loan." The analysis must "measure year-to-year trends for gross income, expenses, and taxable income for the business". The lender may verify income with signed federal returns "(both individual returns and in some cases, business returns) that were filed with the IRS for the past two years". It may waive business returns when the borrower uses personal funds for the down payment, closing costs and reserves, "has been self-employed in the same business for at least five years", and the individual returns "show an increase in self-employment income over the past two years". "When a borrower is using self-employment income to qualify for the loan and also intends to use assets from their business as funds for the down payment, closing costs, and/or financial reserves, the lender must perform a business cash flow analysis to confirm that the withdrawal of funds for this transaction will not have a negative impact on the business." "To assess the impact, the lender may require a level of documentation greater than what is required to evaluate the borrower's business income (for example, several months of recent business asset statements in order to see cash flow needs and trends over time, or a current balance sheet)." "When co-borrower income that is derived from self-employment is not being used for qualifying purposes, the lender is not required to document or evaluate the co-borrower's self-employment income (or loss)." | Fannie Mae Selling Guide, B3-3.5-01, Underwriting Factors and Documentation for a Self-Employed Borrower (12/13/2023) | 2026-10-19 |
| Zach offers loans qualified on 12 months of bank statements instead of tax returns, at any loan size. He qualifies the borrower on either the personal or the business bank account, whichever shows the larger average monthly deposits over the past 12 months, and business-account deposits get an expense factor. | Confirmed by Zach, October 17, 2026 | 2026-10-17 |
| Zach offers loans qualified on a prepared profit and loss statement instead of the net income on tax returns; West Capital Lending offers them, and he arranges them. | Confirmed by Zach, October 17, 2026 (via the Chief of Staff) | 2026-10-17 |
| On the West Capital Lending HELOC registration page, checking qualifying rates and terms uses a soft credit pull that does not affect the credit score; continuing and submitting an application requests a full credit report, which is a hard pull that may affect credit. | West Capital Lending HELOC registration page (referral id omitted here) | 2026-09-09 |
Written for and accountable to: Zach von der Linden, Mortgage broker and Branch Manager, West Capital Lending.
Last updated 2026-10-19.
Verify him: NMLS Consumer Access, ID 1652805 · 66 reviews on Experience.com.
Sources for product claims are listed on this page, with the date each was checked.
S-corp owner with a small salary on paper?
No credit pull happens from a conversation. The options check is a soft credit pull with no impact on your credit score for the first look. Text Zach first so he can review your situation. The online check covers one HELOC program, not every option he may be able to arrange. Texts go to Zach's cell.