Buying a first home in Georgia when you work for yourself

Start with your household, not your business

Before we talk about tax returns, let's look at who lives with you, because it can change which program you're working with. Georgia Dream's PEN tier (6% of the price or $12,500, whichever is less) is written for employees of police and sheriff's offices, fire departments, accredited schools and colleges and state-licensed health care facilities, plus active-duty military, Guard members, drilling reservists, military base civil servants and volunteer firefighters.

If your only work is your own business, you'll usually look at the Georgia Dream Standard DPA instead: 5% of the price or $10,000, whichever is less, as a 0% deferred second mortgage. But if your spouse teaches, works at a hospital or wears a badge, the household may qualify for PEN through that job. And if you also serve as a volunteer firefighter or drill with the Guard, you may fit a listed category yourself.

One more household point: Georgia Dream counts the income of every adult in the home toward its limit, even someone who isn't on the loan. So your business income counts against the limit whether or not you're a borrower.

A worked example: an HVAC contractor in Houston County

Here's an example with made-up figures. Marcus runs a one-man heating and air business near Warner Robins and files Schedule C. His wife is a paraprofessional with Houston County Schools, which puts the household in PEN's educator group.

The 2-year average is $75,700. FHA uses the lesser of that average or the most recent year, so it counts $73,200, about $6,100 a month. The drop from 2024 to 2025 is about 6%, under the 20% decline that would send an FHA automated file to manual review. Freddie Mac would still want the lender to show the income is likely to continue for 3 years.

Now the limit. If his wife earns $28,000, household income is about $101,200 for a family of four. Houston County uses the statewide limit of $116,955 for 3 or more people, so they fit. How DCA figures a business owner's income for that limit is something a participating lender confirms.

Who counts as self-employed

FHA, Fannie Mae and Freddie Mac all draw the line at 25% ownership. Own 25% or more of a business and you're self-employed for the mortgage. A sole proprietor on Schedule C owns 100%. In Georgia, that includes a lot of the people we hear from:

• Electricians, plumbers, roofers and HVAC techs with their own LLC
• Stylists and barbers renting a booth or salon suite
• Private tutors and music teachers
• Contract nurses, therapists and home health aides paid on a 1099
• Owners of a lawn care, cleaning or catering business
• Part-time real estate agents

If you own less than 25%, Freddie Mac lets the lender use either its employed or self-employed rules, with two years of K-1s. A 1099 contractor can be treated as non-self-employed under Freddie's rules only in a narrow case: gross receipts match the 1099s, expenses are under 5% of gross, there's no cost of goods sold and there's a 12-month history.

A 1099 nurse or therapist working inside a hospital might wonder about PEN. The rules describe employees of the facility and don't address contractors, so a participating lender confirms with DCA before you count on it.

How long you need to be in business

• FHA: 2 years. Between 1 and 2 years can work if you spent at least 2 years before that in the same or a related line of work.
• Fannie Mae: 2 years generally. Less can work if your latest returns show a full 12 months from the current business and you earned the same or more before in a similar field.
• Freddie Mac: a combined 2 years of the current business plus a prior job in the same field, with at least 1 year of self-employment on your returns.
• VA and USDA: your lender confirms.

So an electrician who worked for a contractor for 5 years and went out on his own 18 months ago is in a very different spot from someone who started a brand-new kind of business last year.

Paperwork to pull together

1. Two years of complete personal federal returns, with every schedule
2. Business returns for 2 years if you file them, unless your lender says they can be waived
3. A signed IRS Form 4506-C, so the lender can get transcripts
4. A year-to-date profit and loss statement if FHA asks (it does once more than a calendar quarter has passed since your tax year ended)
5. 60 days of bank statements, and keep business and personal money in separate accounts
6. Your homebuyer education certificate and any gift letter

Fannie Mae can accept one year of returns if you've owned 25% or more of the same business for 5 years.

Georgia programs open to business owners

• Statewide: the Georgia Dream Standard DPA. Households with a member living with a disability may use CHOICE (also 6% or $12,500). Peach Plus and Peach Advantage serve buyers above the standard limits.
• City of Atlanta: ATL HomeNOW, up to $20,000 forgivable, which can't be combined with Georgia Dream.
• Fulton County: the Fulton Homeownership Program, up to $22,500 at 80% of area median income.
• Gwinnett County: Homestretch, up to $10,000.
• Cobb County: Cobb DPA, a 1% or 2% grant.
• Clayton, Savannah and Columbus: Clayton's DPA (up to $7,500), DreamMaker and Sweet Home Columbus.

Employer grants, such as Cobb County Government's and the City of Marietta's, require you to be on that payroll, so they don't fit a business owner. Our guide to combining programs covers which ones stack.

What about a bank-statement loan?

Bank-statement loans qualify you on deposits instead of tax returns. Federal ability-to-repay rules allow "financial institution records" as income proof, but these loans fall outside the qualified-mortgage definition. Georgia Dream pairs only with its own DCA-rate FHA, VA, USDA or uninsured conventional first mortgage, and the local programs also require an approved first mortgage. In practice, choosing a bank-statement loan usually means giving up state and local help.

Before you file this year's taxes

Write-offs lower your tax bill and your qualifying income at the same time. If you plan to buy in the next year or two, talk with your tax preparer about that trade-off before you file. Don't skip legitimate deductions, but do understand what each one does to the number a lender will use. When you're ready, check your eligibility and a participating lender can run your actual returns.

Questions we hear a lot