Construction contractor mortgage in Arizona: qualify on cash flow, not your Schedule C.
You build for a living, but your tax return shows almost nothing left after materials and subs. We get it. We qualify Arizona construction contractors on real deposits, not the net income your write-offs already wiped out.
Why is a contractor's Schedule C net so low?
Because the trade eats cash before you ever see it. You buy lumber, concrete, tile, and fixtures. You pay subcontractors. You write off trucks, tools, fuel, and a Section 179 deduction on equipment. By the time those costs hit your Schedule C, the net income looks tiny next to what actually ran through your business.
That low net is great in April. It is a problem in October when you want a house. A conventional loan reads the net, not the gross. If your books show $300,000 in receipts and $60,000 net after all those costs, a conventional loan sees $60,000. That is the trap most contractors hit. The income is real, but the paper hides it.
How do you use my bank deposits instead?
We add up the deposits in your business account over 12 or 24 months and apply an expense factor to cover your costs of goods. For a contractor buying a lot of materials and paying subs, that factor usually lands between 50% and 75%. The math is simple, and it reads your cash flow the way you actually run the business.
Here is the idea. Say your business account takes in $40,000 a month on average. With a 65% expense factor for a materials-heavy trade, we count 35% as income, or about $14,000 a month to qualify on. Compare that to a Schedule C showing $5,000 a month after every write-off. The deposit path can more than double your buying power. See our bank statement loans page for how the deposit review works step by step.
What if my real overhead is lower than the default factor?
Then the default factor is costing you. Some contractors run leaner than the standard assumption. Maybe you bill labor more than materials, or your subs invoice the client directly. If that is you, a CPA can write a letter or prepare a profit and loss statement that shows your true expense ratio.
When your CPA documents, say, a 35% expense ratio instead of the default 65%, we count more of your deposits as income. That raises your qualifying figure and your loan amount. Our profit and loss only loans page covers the P&L path on its own, for contractors who would rather lead with a CPA statement than a stack of bank statements. We will tell you which one fits your file.
What documents do you need from a contractor?
Less than a conventional loan, but the right things. We confirm you are a real, licensed business with steady cash flow, then we read the money. Here is the short list:
- Contractor license: Your active Arizona ROC license or trade certification, proof the business is legitimate.
- Liability insurance: A current certificate of insurance for the business.
- Bank statements: 12 or 24 months for the business account we will read deposits from.
- Contracts or invoices: A sample of active jobs or signed contracts showing work continues.
- CPA letter or P&L: Only if we take the profit and loss path or argue for a lower expense factor.
We do exclude certain deposits when we count. Transfers between your own accounts, loan proceeds, owner contributions, and one-time deposits that are not revenue all come out before we apply the factor. We want recurring business income, not money that just passed through. We tell you up front what counts and what does not, so the qualifying number is honest.
How do you structure the loan?
We start with the cheapest path that works. First we pull your tax returns and test a conventional loan, because it usually carries the best terms. If the write-offs sink the net income, we pivot to a bank statement or P&L loan and qualify you on deposits. You do not pay extra for us to check both.
For the bank statement and P&L loans, we look for a credit score of 620 or higher and a down payment of 10% to 20%. A stronger score or a larger down payment improves your terms. We also like to see a few months of payments in reserve after closing. Browse our full programs to see how these fit alongside our other self-employed options. Then we run your real numbers and tell you which path qualifies you for the most.
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Construction Contractor Mortgage Arizona — Frequently Asked Questions
Can a construction contractor get a mortgage with low taxable income?
Yes. We check your tax returns first to see if a cheaper conventional loan works. If materials, subcontractors, and write-offs crush your Schedule C net, we move you to a bank statement or P&L loan that qualifies you on your deposits instead. Low taxable income does not have to mean a small loan. We use the documentation path that shows your real cash flow.
Do contractors need tax returns to qualify for a mortgage?
Not always. A conventional loan needs two years of tax returns, and we look at that first because it is the cheapest option. If your write-offs sink the net income, we switch to a bank statement loan that uses 12 to 24 months of deposits, or a CPA-prepared profit and loss statement. Both skip tax return income entirely and read your business cash flow directly.
How do you calculate a contractor's income?
On a bank statement loan, we add up your business deposits over 12 or 24 months and apply an expense factor, usually 50% to 75%, to cover your costs of goods. Trades that buy a lot of materials and pay subcontractors get a higher expense factor. If your real overhead is lower than the default, a CPA letter or P&L can raise your qualifying income. We run both ways and use whichever qualifies you for more.
What credit score and down payment do contractors need?
For our bank statement and P&L loans, we look for a credit score of 620 or higher and a down payment of 10% to 20%. A stronger score and a larger down payment improve your terms. We also want to see your contractor license, liability insurance, and a steady deposit history. Reserves of a few months of payments after closing help your file.