One of the downsides of self-employment is that lenders typically want to see two years of tax returns as proof of income (as opposed to showing a pay stub if you're in a regular job). It doesn't really matter whether you trade as an individual, LLC, s-corp., etc. If you have a corporate structure you could use ADP for your payroll and have a legitimate looking pay stub, but you would still need to disclose that you're the owner (then you're back to two years of tax returns).
Small-business owners who are just starting out are victims of this sub-prime mess just for the fact that they would typically apply for a mortgage using a no-doc, low-doc, or stated-income approach. I personally blame the borrowers more than the lenders for the current mess, but the net result is the same: responsible people who legitimately need low-doc loans are now much less likely to be approved for a mortgage, regardless of the interest rate.
I am a computer programmer (and aspiring full-time trader) and I've had my own s-corp for seven years with a stable six-figure income from this activity. In the fall of 2005, I switched from being a W-2 contractor for my primary client to being an independent contractor (corp-to-corp) -- same client, same level of effort, more money. This was financially advantageous in many ways, except when I decided to refinance my home in January 2006. Even though I was working for the same client I had been for the past several years and making more money than before, I couldn't produce a pay stub (I was no longer their employee) and I couldn't demonstrate two years of returns with sufficient business income (for the prior two years I only had small amount of revenue through my s-corp from ancillary clients -- 90 percent of my income was from wages).
I had no choice but to apply for a stated-income loan (I could document my assets, so that didn't put me in the no-doc realm, the so-called "drug dealer" loan). Fortunately, this option was available to me from several lenders, and in the end my interest rate was only about a quarter point higher than a conventional, full-doc loan (although I did have to pay an extra half-point at closing). Given the same circumstances, I have doubts that I would have been able to secure any loan in today's lending environment, despite excellent credit, documented assets, etc. These stated-income loans were abused by borrowers who knew they had insufficient income for the mortgage they were opening, but assumed that rising home values would save their asses. I also fault the educational system in this country for not teaching kids the basics of personal finance so they can intelligently review and understand mortgage documents before they sign them -- it's ridiculous.
Anyway, I'm sorry to turn the answer to your question into a soap-box speech. Good luck.
Regards,
Just kidding, point taken