Map Shows Where Self-Employed Mortgage Borrowers Are Most Common

Over half of the U.S. states have seen an increase in self-employment since 2019, and a new map shows which states have the highest rate of self-employed workers.

As of 2024, the states with the highest percentage of self-employed workers were Vermont at 8.6%, Montana at 8.4%, Maine at 8.0%, South Dakota at 7.6%, and North Dakota at 7.4%. 

California comes in at No. 6 with 7.4% of its population identifying as self-employed, according to an analysis from AD Mortgage.

A leading non-qualified mortgage lender, AD Mortgage pulled from the 2019 and 2024 U.S. Census Bureau ACS data for all 50 states and Washington, DC, to get a glimpse at the self-employment trend throughout the country.

A self-employed worker is defined as an employed person aged 16 or older who works in their own unincorporated business. In addition to small-business owners, this title refers to freelance workers such as writers, videographers, and graphic designers; personal service providers like cosmetologists and personal trainers; and gig workers such as ride-share drivers, food couriers, and independent task workers.

“The employment market is changing and is not as traditional as it used to be,” Mike Pearson, senior vice president of business development at AD Mortgage, tells Realtor.com®. “Parts of the economy are growing that are nontraditional. There could be influencers, freelancers that do tech work, build websites or an app. You still have your carpenters, your painters, and investors in crypto and wealth management. Those people are still earning a paycheck, right? It’s just not a W-2. We wanted to show that.”

Out of the 50 states and Washington, DC, 29 states had an increase in the percentage of self-employed workers between 2019 and 2024.

The largest increases were seen in Rhode Island with an increase of 1.84 percentage points; Vermont with an increase of 0.94 percentage points; New Mexico with an increase of 0.80 percentage points; Nevada with an increase of 0.74 percentage points; and Arkansas with an increase of 0.53 percentage points.

For self-employed workers who don’t fit the typical guidelines for borrowers, a loan option still exists in non-QM loans. These loans are designed for borrowers with irregular streams of income or blemishes on their credit history. (A "qualified mortgage" is a loan that meets federal rules for both the loan structure and borrower qualifications.)

Rather than using a W-2 and tax returns as proof of income, non-QM loans offer flexibility by allowing potential borrowers to apply using bank statements, multiple 1099 forms, or profit-and-loss statements.

“It’s no surprise that the amount of people seeking out non-QM loans is growing,” Pearson says. “It’s an alternative way to get financing when a lot of people aren’t qualified to get financed through traditional FHA or conventional loans.”

In addition to offering alternative income verification methods, non-QM lenders are more lenient with credit scores. However, these loans may also have higher rates due to the increased risk and may require borrowers to have more savings stashed away.

“They typically require money in the bank, also known as reserves. The reserve requirement varies by program and the borrower's credit, but typically range as low as three months of mortgage payments to as high as 12,” Carlos Scarpero, mortgage broker with Edge Home Finance, tells Realtor.com.

Pearson recommends that anyone interested in purchasing a home speak to a lender to discuss options, even if they don’t think they’ll meet conventional criteria.

“If you want to buy a house, try to talk to a specialized lender or broker,” says Pearson. “Don’t think that you can’t do it, because there are a lot of different programs out there.”

Surprisingly, several of the states with the highest rates in 2024 had experienced decreases in the number of self-employed workers since 2019.

Maine’s number of self-employed residents decreased by 0.16 percentage points; California saw a decrease of 0.40 percentage points; and South Dakota had the sharpest decline out of all the states since 2019, with its self-employed population falling 0.73 percentage points.

The five states with the lowest rates of self-employed workers in 2024 were Utah with 4.79%; Illinois with 4.61%; Indiana with 4.57%; Washington, DC, with 4.24%; and West Virginia with 4.06%.