1099-Income Mortgage Loans

In this blog, article, we will cover 1099-Income Mortgage Loans for independent contractor wage earners. Independent contractors can now qualify for a home loan even though they have substantial unreimbursed business expenses. Prior to the launch of 1099-income mortgage loans, independent contractors and 1099 wage earners had a difficult time qualifying for a mortgage loan.

1099-Income Mortgage Loans is now offered at Non-QM Mortgage Brokers for independent contractors with no income tax returns required. One-year 1099-income only is used to calculate income. Unreimbursed business expenses are not taken into account.

Now, 1099 wage earners can qualify for a mortgage with just their 1099 earnings without taking the unreimbursed business expenses into account. 1099-income mortgage loans does not require federal income tax returns. All you need is one year 1099 statement. The earnings on the 1099 statement will be used as your qualified income. In the following paragraphs, we will cover 1099-income mortgage loans and how it works.

Table of contents "Click Here"

What Are 1099-Income Mortgage Loans For Independent Contractors?

Are you an independent contractor or employee under the 1099 wage category? Have you been trying to get a mortgage with your local credit union or bank but keep getting denied simply because you didn’t provide tax returns? Have you written off a lot of unreimbursed business expenses on your federal income tax returns? If you did, they didn’t show enough to qualify you for a loan?

Non-QM Mortgage Brokers has 1099-income mortgage loans with no income tax returns required. It requires 20% down payment and will only go off the income statement of one year 1099 earning statement.

If so, there is a loan product that is designed for borrowers like you – 1099-income mortgage loans. Lenders go off the adjusted gross income from your federal income tax returns. Now, you can qualify for a mortgage with just your 1099 statement. One year 1099-income mortgage loans are non-QM loans that do not require tax returns.

Traditional Versus 1099-Income Mortgage Loans

Traditional mortgages don’t take care of independent contractors and 1099-income only wage earners. Wage earners who earn wages via independent contractor employment status have lower qualified income due to unreimbursed business expenses. 1099-income only wage earners are restricted often do not have enough qualified income. This is because lenders are restricted to using only the taxable portion of the borrower’s wages to qualify them for a mortgage.

1099-income only wage earners no longer have to worry about writing off too many business expenses from their income tax returns to purchase a home. The 1099-income only mortgage program enables independent contractors to qualify for a mortgage just using their 1099- earnings statement. Income tax returns are no longer required.

Since 1099 income borrowers have their taxable income substantially reduced, traditional mortgage lenders tend to think that they can’t make monthly payments should they give them the loan. Don’t worry, though! 1099 income-only mortgages are a perfect solution, and we will tell you all about it in this guide, so please keep reading.

How Does 1099-Income Mortgage Loans Work

In simple terms, 1099 mortgages are loan products specially designed for self-employed or employees under the 1099 wage category and those who receive most or all of their income from 1099 tax forms rather than from the traditional W-2 salary. These mortgages are often more challenging to get compared to conventional loans.

1099-income only wage earners can now qualify for a mortgage without using their income tax returns. You can now qualify for 1099-income mortgage loans with one year 1099-income statement. Lenders will not average the past two years of your adjusted gross income from you income tax returns.

Mortgage lenders are more hesitant to provide them, and when they do, they come with more stringent requirements and less favorable terms. However, they are still a good option for borrowers who may not qualify for traditional loans due to their income structure. You need to look and carefully consider your options and find the lender who will offer you the best deal.

What Are The Requirements For 1099-Income Mortgage Loans

To qualify for 1099 income mortgages, you need to provide the following documentation and meet specific requirements;

1099 forms – your lender may ask you to bring copies of 1099 forms showing the amount of income you have been receiving from your work.
Credit score – many lenders require borrowers to have a decent credit score to qualify for a 1099-income mortgage. The credit score required may vary from one lender to another, but a score of 660 or higher is generally considered good.
Debt-to-income ratio – the debt-to-income (DTI) ratio is also highly considered as it gives the lender a rough idea of the amount of income left after debt payments. This tells the lender whether or not you will be able to afford the loan. For context, the DTI ratio represents the ratio of a borrower’s monthly debt payment to their monthly income. So, a lower DTI ratio may easily qualify you for a loan.
Down payment – you also need a down payment to qualify for the mortgage. The higher the down payment, the better your chances of qualifying are.
Some lenders might ask you to bring tax return forms just for them to verify your income. This may be optional.
Other documentation – the lender may also ask for your bank statements, proof of assets, and many others to help verify your actual financial situation.

Terms and Rates of 1099-Income Mortgage Loans

Essentially, 1099 income mortgages work similarly to traditional mortgages. However, there are key differences that you will need to keep in mind. They are as follows;

Interest Rates on 1099-Income Only Mortgages

1099-income mortgages attract a higher interest rate than traditional mortgages, which is for a good reason. Non-QM lenders generally has slightly a higher interest rate than traditional conforming mortgage lenders.

Mortgage rates on 1099-income mortgage loans generally require a 20 percent down payment and has a slightly higher interest rate versus traditional conforming mortgage lenders.

Lenders usually consider these mortgages riskier, given that the requirements are slightly relaxed compared to conventional loans. It is important to note that the interest rate you get charged will depend on your credit score and overall financial situation.

How Do 1099-Income Only Lenders Verify Your Income

As we already mentioned, the borrower may be asked to provide 1099 forms or tax returns to verify their income. Of course, this depends on the lender. Still, the lender aims to get a sense of their financial history and stability, especially given that the 1099 income may be less stable and predictable than traditional W-2 income.

Repayment Terms of 1099-Income Mortgage Loans

When it comes to the repayment of 1099 income mortgages, the terms of the loan, which includes the length and the monthly payments, depend on the lender’s requirement and the borrower’s financial situation. The down payment also plays a critical role in determining the repayment terms. So, as a borrower, you may want to review the terms of the mortgage to understand the repayment schedule before agreeing to the loan.

How To Obtain 1099-Income Mortgage Loans

Applying for a 1099 income mortgage is easy, as you will soon find out. It’s like other traditional mortgages. So, here are the steps you can follow to get started:

Prepare In Advance Applying 1099-Income Mortgage Loans

The truth is, when planning to take up a mortgage, you need to prepare in advance. What we mean by this is that you need to save for the down payment because, as we said, you must have a down payment when applying for a 1099 income mortgage.

Gather Documentation For Mortgage Processor

Once you are ready, you must gather all the necessary documentation. We are talking about 1099 forms, bank statements, proof of assets, other financial documents, and possibly tax returns. Make sure you have all these documents before starting the application process.

Find Non-QM Lender Specializing in 1099-Income Mortgage Loans

It is always recommended that you don’t settle for the first lender you come across; it is good to shop around, looking for the one who offers the most competitive mortgage products that fit your needs perfectly. Consider factors such as interest rates, fees, and repayment terms.

Complete 1003 Mortgage Loan Application

You can now complete your application, which typically involves providing complete information about your financial situation, including your assets, debts, and credit history.

Wait For Pre-Approval

Once you submit your application, the lender will review it and decide on your suitability for the loan. This process can take weeks before it is complete, and in between, the lender may also request more documentation, so you should always be ready.

Start The Mortgage Process

Prequalification gives you a sense of how much you can qualify for, which will help when searching for your ideal property. You can receive an alert online or even over the phone, which can be pretty convenient.

Close Your Home Loan

Once you qualify for the loan, the final step will be to close. This process involves the signing of the mortgage agreement as well as paying any closing costs or fees. It is good to remember that this application process for a 1099 income mortgage may vary from lender to lender, given that each lender may have different requirements and terms. So, you should speak to a mortgage broker for guidance on the application process.

Who Can Obtain 1099-Income Mortgages Loans

Here is a list of individuals who can qualify for 1099 income mortgages:

Freelancers work on a project-by-project basis and primarily receive their incomes in the form of 1099s.
Small business owners
Independent contractors – these are individuals who work on a contract basis and also receive their wages in the form of 1099s
Self-employed individuals

How Do I Pre-Qualify For 1099-Income Only Mortgage Loans?

Keep in mind that these 1099 loans come with higher interest rates and stricter credit requirements than conventional mortgages, as many lenders consider them great risk. So, if you are looking to take up a 1099 income mortgage, it is highly recommended that you carefully review your financial circumstances. Consider all the options that are available to you before you make your decision. It might be helpful to speak to a mortgage broker. A mortgage loan originator can offer the many mortgage loan options that is best suited for you.

Comparing The Best Mortgage Loan Options

You can seek guidance with a mortgage professional for guidance to get more information about these mortgages. Most importantly, to help you get the best deal possible. If you need to start the pre-qualification process to get pre-approved for 1099-income only mortgage, please contact us at non-QM Mortgage Broker at 262-716-8151 or text us for a faster response. You can email us at gcho@gustancho.com. The team at Non-QM Mortgage Brokers is available seven days a week, evenings, weekends, and holidays.