Buying in Old Town Scottsdale as a self-employed borrower means clearing two gates, not one. Your income has to survive an underwriter's reading of your tax returns, and the building has to survive project review. Files here die at either gate, and most buyers only find out about the second one after their offer is accepted.
Answer both before you write, and Old Town is straightforward. Answer neither, and you lose the earnest money finding out.
Gate one: what your tax returns say you earn
An underwriter does not use your revenue. They do not use your P&L. They rebuild your income from two years of filed returns using a standardized worksheet, Fannie Mae Form 1084 or Freddie Mac Form 91, and the number that comes out is usually well below the number in your head.
- Schedule C: net profit from line 31, plus depreciation, depletion and business use of home added back, minus non-recurring income, divided by 24.
- 1120S and K-1: your W-2 wage counts. K-1 ordinary income counts only when distributions are documented and the business has the liquidity to keep paying them. Short-term obligations get subtracted unless you can evidence otherwise.
- 1065 and K-1: same treatment, with guaranteed payments included.
- Schedule E: rental net, with depreciation, taxes, insurance, interest and HOA added back where allowed, minus full PITIA.
The trade underlying all of it: every dollar of aggressive deduction saves you tax at your marginal rate and costs you roughly four to five dollars of buying power. That is a fine trade to make. It is a terrible trade to make by accident in the two years before you buy.
And if year two is lower than year one, expect year two to be your qualifying income. Averaging is for rising income, not falling income.
Gate two: the building
This is the gate that separates Old Town from every other Scottsdale neighborhood, and it has nothing to do with you.
A large share of Old Town's inventory is attached: condominiums, mid-rise, and mixed-use buildings with retail or restaurant space at street level. Every one of those is subject to condo project review, and the project can fail review even when the borrower is perfect.
What gets checked, and what fails:
Owner-occupancy ratio. Investor-heavy projects fail or get restricted on agency financing. In a submarket with heavy rental and second-home ownership, this is not a rare finding.
Commercial and non-residential space. Agency guidelines cap the share of a project's square footage that can be commercial. A building with a full ground-floor restaurant row can exceed it. Old Town has a lot of exactly that.
Reserves and the budget. The association is generally expected to fund a meaningful share of its budget into replacement reserves. Underfunded associations fail.
Litigation. Pending construction defect litigation is often a hard stop on agency financing.
Delinquencies and single-entity ownership. Too many owners behind on dues, or one entity holding too many units, will restrict the project.
Short-term rental policy. If the project operates like a hotel, with a rental desk, front desk services, or mandatory rental pooling, it can be classified as a condotel and fall outside agency financing entirely.
The practical rule: ask for the HOA questionnaire, budget, reserve study, and master insurance certificate before you write the offer, not during inspection. A project that fails agency review is not necessarily unfinanceable, but it is a different loan at a different price, and you want to know that while you still have leverage on price rather than after you have spent two weeks and an appraisal fee.
Old Town also sits inside Scottsdale's short-term rental licensing framework, and Arizona municipalities have real registration, notification and insurance requirements for short-term rentals. If your plan for the property involves nightly rental, confirm what the city requires and what the association permits. Those two answers are frequently different, and the stricter one wins.
When the returns do not support the purchase
Take the conventional or jumbo loan if your returns support it. It is nearly always the cheapest money on the table. If they do not, three documented structures exist. None of them is a shortcut around qualifying. Each is a different way of proving repayment capacity, and each prices differently than agency debt for that reason.
Bank statement. Twelve or twenty four months of statements, income derived from deposits with an expense factor applied. Strong fit for consistent deposit flow. Poor fit where revenue is lumpy or accounts are constantly transferred between, because transfers get stripped from the calculation.
Asset depletion. Qualifying income calculated from verified liquid assets. Retirement accounts are typically discounted, and pledged assets generally do not count.
Debt service coverage, or DSCR. For an investment purchase, the property's rental income is tested against the payment instead of your personal income. This one matters in Old Town specifically, because so much of the inventory is bought to rent. Be aware that lenders treat projected short-term rental income far more conservatively than a signed twelve-month lease, and some will not use it at all.
No-ratio. No debt-to-income test. The file rests on credit, assets, reserves and the property. This is the structure for the borrower whose reportable income genuinely does not describe their financial position.
A real Scottsdale short-term rental file
A self-employed buyer was purchasing a Scottsdale property off Shea Boulevard to run as a short-term rental. He had already been turned down by more than one lender before we were introduced.
Nothing was wrong with the borrower. What was wrong was the analysis. He owned multiple properties including multi-unit assets, his credit was real, his balance sheet was substantial, and none of it fit the debt-to-income test the previous lenders kept running. When the only tool is a ratio calculation, a borrower with a complex portfolio and a deducted-down return looks weak on paper and strong in reality.
We went through the whole picture: the financials, the credit report, the properties, the multi-unit holdings, the actual liquidity. Then we structured it as a no-ratio loan, where the file stands on credit, assets, reserves and the property rather than on a DTI figure that was never going to describe him accurately. It closed.
The lesson generalizes to Old Town directly. A short-term rental buyer with a portfolio is one of the most common profiles in this submarket and one of the most commonly declined, and the decline is usually a failure of underwriting imagination rather than a failure of the borrower. The question to ask a lender is not "what is your rate." It is "which structures do you have access to when the ratio does not work."
Client file details are shared with permission and with identifying information removed. Every file is different, and a result on one file is not a prediction about yours.
Your Old Town checklist
Before you shop:
- Get fully underwritten, not pre-qualified. A pre-qualification is a calculator. An underwritten pre-approval means someone has already read your returns and K-1s.
- Decide the structure first, so you know your real purchase price rather than a rate sheet estimate.
- Talk to your CPA about the two years of returns that will qualify you, before they are filed.
Before you write the offer on a specific unit:
- HOA questionnaire, budget, reserve study, master insurance certificate. Every time.
- Owner-occupancy percentage and commercial square footage share. These are the two that most often fail here.
- Litigation disclosure.
- Written confirmation of the association's rental policy, and separately, the city's short-term rental requirements if that is your plan.
Why bring this file to us
- We read the returns ourselves, and we read the HOA package before you are committed, not after.
- Broker model. Multiple investors rather than one bank's shelf, which is what a non-warrantable project or a complex self-employed file actually needs.
- The full toolkit, agency through bank statement, asset depletion, DSCR and no-ratio non-QM, chosen on the file rather than on what is in inventory.
- You talk to the principal. Ricky Khamis is President of EPiQ Lending, NMLS #173141, lending in Arizona since 1999 and a 2025 Presidents Club Winner at CMG Home Loans. Direct line: (480) 999-9842.
EPiQ Lending is NMLS #1936984, at 7975 N. Hayden Road, Suite A-101 in Scottsdale. Verify all of it before you trust any of it: Ricky's EPiQ Lending profile, the Scottsdale branch, and the license itself at NMLS Consumer Access. Hold every lender to that standard, including us.
Send me the building and two years of returns before you write in Old Town, and I will tell you whether the project clears and what you qualify for.
Equal Housing Opportunity. This is general information, not a commitment to lend or an offer to extend credit. Rates, terms, and program guidelines change and depend on credit approval, property appraisal, and other qualifying factors. Not all applicants will qualify. Non-QM, DSCR and no-ratio financing carries different pricing and terms than agency financing. Consult your tax advisor regarding the tax consequences of any deduction strategy, and the City of Scottsdale regarding short-term rental requirements.
