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Bank Statement Mortgage as a 1099 Independent Contractor: A Comprehensive Guide

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For many independent contractors or self-employed individuals, proving a steady income to secure a traditional mortgage can be challenging. This is especially true for 1099 contractors whose income may fluctuate or be difficult to document via conventional means. In these cases, a bank statement mortgage may be a fitting solution. Let's delve into how you, as a 1099 independent contractor, can successfully apply for a bank statement mortgage.

Understanding Bank Statement Mortgages

A bank statement mortgage, also known as a self-employed mortgage, allows a borrower to use bank statements as proof of income instead of relying on tax returns or pay stubs. The mortgage lender typically reviews 12 to 24 months of bank statements to ascertain your ability to repay the loan.

This type of mortgage is particularly beneficial for 1099 independent contractors, freelancers, or small business owners, whose income might not reflect their actual earnings due to business expenses and deductions.

Steps to Getting a Bank Statement Mortgage

1. Gather Your Documents

The primary document you need for a bank statement mortgage is, unsurprisingly, your bank statements. Lenders will typically ask for 12-24 months' worth of personal or business bank statements. They'll use this to calculate your average monthly income.

2. Maintain a Healthy Bank Balance

Lenders will examine your bank balance to ensure you have sufficient funds to cover your mortgage payments, especially during leaner business periods.

3. Check Your Credit Score

Your credit score is another crucial factor lenders consider. The higher your score, the better your chances of qualifying for a bank statement mortgage.

4. Find a Lender

Not all lenders offer bank statement mortgages, so you'll need to shop around to find one that does. Some mortgage brokers specialize in helping borrowers secure non-traditional loans, so they might be worth consulting.

5. Apply for the Loan

Once you've found a lender (we recommend Truss Financial Group 😜), it's time to apply. They'll use the documents you provide, your credit score, and your bank statements to determine whether you qualify for the mortgage.

Considerations for 1099 Independent Contractors

As a 1099 independent contractor, there are a few additional considerations to keep in mind:

  • Inconsistent Income: One of the challenges of being a 1099 contractor is the potential for inconsistent income. Lenders understand this but will want to see a reasonable average income and some level of consistency in your deposits.

  • Business Expenses: If you use your personal account for both business and personal expenses, lenders might have a hard time discerning your actual income. Consider keeping your personal and business finances separate for clarity.

  • Tax Deductions: While tax deductions can reduce your taxable income, they can also make it harder to qualify for a mortgage, as your income may appear lower than it actually is. It's a balancing act that requires careful planning.

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