Building & financing
Construction loans for self-employed and small business owners.
Building is the natural answer when the Eastside has the lot you want but not the house. The obstacle for founders, consultants and small business owners is rarely the project — it is proving income to an underwriter who reads a K-1 differently than a W-2. This hub covers both halves: how construction financing works, and what self-employed borrowers need on file.
Quick answer
Most self-employed borrowers finance a new build with a one-time close construction-to-permanent loan: the lender approves the borrower, the builder and the plans together, releases funds in inspected draws during construction, then converts to a standard mortgage at completion. Expect two years of business and personal returns, year-to-date profit and loss, business bank statements and a CPA letter; qualifying income is net income after deductions, plus add-backs such as depreciation. Budget a 10-15% contingency and confirm whether the lot is already owned free and clear, since lot equity often serves as part of the down payment.
2 years
Business and personal tax returns most lenders require
10–15%
Contingency reserve typically required in the build budget
Draws
Funds released in inspected stages, not one lump sum
Questions this hub answers
- construction loan for self employed
- one time close construction loan requirements
- how do lenders calculate self employed income
- construction to permanent loan washington
- financing a custom home build
From lot to keys
- 01
Get pre-underwritten before you buy the lot
Self-employed files take longer to read. Having income reviewed first tells you the real budget and prevents buying a lot the build cannot be financed on.
- 02
Confirm the lot can be built on
Zoning, critical areas, slope, utilities, septic or sewer capacity and permit timelines decide feasibility. A cheap lot with a hard site can cost more than a more expensive, easy one.
- 03
Choose one-time close or two-close
One-time close means a single approval and one set of closing costs, with the rate locked earlier. Two-close means a short construction loan, then a separate permanent loan — more flexibility, more cost.
- 04
Get the builder approved with the plans and budget
Lenders underwrite the builder as well as the borrower: license, insurance, references, fixed-price contract, and a line-item budget with contingency.
- 05
Manage the draw schedule during the build
Each stage is inspected before funds release, and you pay interest only on what has been drawn. Change orders need lender sign-off, so decide the finishes before the framing goes up.
One-time close vs two-close
| Item | One-time close | Two-close |
|---|---|---|
| Approvals | Single approval for build and mortgage | Approved twice, at build and at conversion |
| Closing costs | One set | Two sets |
| Rate risk | Locked earlier, less exposure | Repriced at the permanent loan |
| Flexibility | Changes need lender approval | Easier to change lender or product later |
| Best for | Fixed-price contract, clear scope | Complex builds or an evolving budget |
Checklist
Documents self-employed borrowers should have ready
- Two years of business and personal federal tax returns, all schedules
- Year-to-date profit and loss statement and balance sheet
- Twelve months of business bank statements
- CPA letter confirming ownership share and business continuity
- Fixed-price builder contract with a line-item budget and contingency
- Plans, specifications, permit status and the builder's license and insurance
Self-employed construction financing questions
Why do lenders use net income instead of revenue?
Qualifying income is what remains after the deductions you took, with certain non-cash items such as depreciation added back. Aggressive write-offs lower taxes and also lower qualifying income — worth planning two years before you build.
Can I use the lot as my down payment?
Often yes. If the lot is owned outright, its appraised value can count as equity toward the required contribution. Confirm with your lender before paying cash for a lot, because how and when you bought it matters.
What if the build goes over budget?
That is what the contingency is for. Beyond it, you cover the overage in cash or request a loan modification, which is not guaranteed. A fixed-price contract with a clear allowance schedule is the strongest protection.
Do I make payments during construction?
Typically interest-only on the amount drawn so far, which rises as the build progresses. If you are also paying rent or another mortgage, plan the overlap into your cash flow from the start.
Related reading
Other topic guides
Family transfers
Gift of equity and selling a home to a family member in Washington.
Title & closing
Selling a house with a lien in Bellevue and Greater Seattle.
Land value
Selling an older Eastside home to a builder: land value vs. retail sale.
Visa & foreign buyers
Buying a home in Bellevue as a foreign national or visa holder.
Tech relocation
Relocating to Bellevue for a tech job: rent first or buy now.
Schools & addresses
Buying by school assignment in the Bellevue School District.
Waterfront & unique homes
How to price a waterfront or one-of-a-kind home.
Listing problems
How to cancel a listing agreement and change agents.
Land & lot value
Should you split a double lot before selling it?
Water & site risk
Flood zone, creek and drainage checks before you buy.
Landlords & investors
Selling a rental property to your current tenant.
Thinking about building on the Eastside?
We will help you test the lot for feasibility, connect you with lenders who read self-employed files well, and review the builder contract before you sign.
Talk about your build