Running your own business and buying a first home in South Carolina

Start with the numbers a lender will use

Before discussing programs, let us begin where an underwriter begins: your tax return. A lender does not qualify you on what customers paid you. It starts from the taxable profit on your return, adds back certain non-cash deductions, and averages the result over time.

For a sole proprietor, FHA and Fannie Mae both add back depreciation, depletion, business use of the home, amortization and casualty losses from Schedule C. Freddie Mac adds back non-cash deductions and nonrecurring losses. Then the averaging rule takes over, and this is where many owners are caught off guard.

A worked example: an HVAC contractor in Summerville

Heating and air work is steady trade in South Carolina's climate. Consider a sole-proprietor HVAC technician in Dorchester County, filing Schedule C, with one slower year:

The two-year average is $73,500 a year. But FHA uses the lesser of the two-year average or the most recent year, so it would use $70,000, or about $5,833 a month. The drop here is about 9%, well under the 20% decline that would push an FHA file from automated to manual underwriting. Fannie Mae and Freddie Mac require the lender to study the trend and, for Freddie Mac, to justify that the income will likely continue three years.

For SC Housing's limits, Dorchester is a targeted county with a 2026/2027 limit of $141,000 for one or two people and $164,500 for three or more, so this household fits comfortably. In Dorchester, a buyer only needs to not own a home at closing to meet the first-time rule.

A second example: two partners in a Beaufort marine repair shop

All three agencies treat anyone who owns 25% or more of a business as self-employed. Suppose two partners each own 50% of an S corporation that repairs boats near Beaufort. Each would provide personal returns and the business return with their K-1. Fannie Mae counts S corporation income only if distributions match the K-1 income or the business has adequate liquidity, and Freddie Mac does not accept K-1 cash distributions as qualifying income on their own. A partner owning less than 25% is treated differently; Freddie Mac allows that income under its regular employment rules with two years of K-1s.

How long you need to have been in business

• FHA: two years, or one to two years if you worked at least two years before that in the same or a related field.
• Fannie Mae: generally two years; less is possible if your latest returns show a full 12 months from the current business and you earned as much doing similar work before.
• Freddie Mac: a combined two-year history with your prior work in the same field, at least one year of self-employment on your returns, and a written justification from the lender.
• VA and USDA: their self-employment rules were not verified for this page, so your lender confirms.

Our technician who worked six years for an HVAC company before going out on his own would fit FHA's exception even in his second year of business, because the trade is the same.

The documents to gather

1. Two years of signed personal returns with every schedule.
2. Business returns if you own a partnership or corporation. FHA may waive these if your personal returns show rising income and you are not using business funds to close.
3. A signed IRS Form 4506-C so the lender can pull transcripts.
4. A year-to-date profit and loss statement. FHA wants one once more than a calendar quarter has passed since your tax year ended.
5. Your South Carolina contractor license or business license, or a CPA letter, so the lender can verify the business exists.

Fannie Mae and Freddie Mac can accept one year of returns when you have owned at least 25% of the same business for five years.

Which South Carolina programs fit

None of SC Housing's year-round options ask about your job title. The Homebuyer Program and County First Initiative use county income limits and the $450,000 price limit. Palmetto Home Advantage has no first-time rule and no price limit, with a $140,000 income cap on the current chart. Local programs such as Greenville County's, Richland County's RCHAP and Lexington County's work the same way. Employer programs, like those for City of Greenville or Prisma Health staff, require you to work for that employer.

Palmetto Heroes is tied to a job list. A veteran who runs a business qualifies through military service. For other listed roles, whether a self-employed or 1099 worker qualifies was not stated in the sources we could review, so a participating lender confirms. The program is closed for 2026.

Bank-statement loans: a fair warning

If heavy write-offs leave too little income on paper, you may hear about bank-statement loans. Federal ability-to-repay rules allow income to be verified with financial institution records, which is why these loans exist. However, SC Housing's programs ride on FHA, VA, USDA or agency conventional loans. A bank-statement loan usually cannot carry the $10,000 in assistance. We would ask your lender to price both paths before you choose.

Before you apply

Keep business and personal accounts separate, avoid large unexplained deposits, and talk with your tax preparer about the trade-off between deductions and qualifying income before you file. Then please check your eligibility to be matched with a lender who regularly handles self-employed files.

Further questions