Mortgages for 1099 Employees

The mortgage approval process for a 1099 employee is a tad different.  Since independent contractors don’t receive a paystub every two weeks and are able to legally write off business expenses from their taxes, getting a conventional loan from a big bank can be challenging.  Good news, friends: 1099 employees have an option when it comes to getting a mortgage.  

I’m going to break it down for you in this blog post.  How do I know this?  Three reasons:

1. I write for A Nightmare on Loan Street Blog where I write about alternative lending, so this topic is right in my wheelhouse
2. I’m an independent contractor, so this is right in my wheelhouse
3. I don’t have a third option, but things look better in groups of 3, plus it gives me another reason to use the word “wheelhouse”

This blog post will apply to anyone with a 1099 like: realtors, personal trainers, hair stylists, musicians, bookkeepers, and my personal favorite - bloggers.  

If you’ve applied for a conventional mortgage from a big bank, and Tammy let you know that you don’t qualify because the income reported on your W2 isn’t enough, this blog post is 100% for you.  

Let’s talk about an option called a bank statement loan.  A bank statement loan uses 12-24 months of bank statements to verify your income.  This allows the lender to review deposits over 12-24 months and create an average monthly income.  It helps the lender with an accurate view of the deposits made over time.  It only looks at deposits made into your bank account.  The legal deductions don’t “hurt” your ability to qualify in the same way they might with a conventional loan.

As an independent contractor, you aren’t getting a regular paycheck, and deposits might happen in a flurry, after a big job, or at certain times in the year.  The bank statement loan helps normalize that income over the course of 1 or 2 years so the bank uses this information to see if you qualify for the loan.

In addition to the bank statements, lenders will also look at your credit score.  You’ll also need to be in business for at least 2 years.  Finally, expect a down payment of 10-20% for a bank statement loan.  These criteria may vary from lender to lender, but it’s a good starting point.

If you’re a 1099 employee and have been turned down for a loan from a big bank, you may want to consider a bank statement loan.  The experts at Truss Financial Group can help with that.  They take a common sense approach to lending and specialize in bank statement loans.  You might say it’s in their wheelhouse.