1099-Income-Only Mortgages

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1099 Income Only Mortgages: A Game-Changer for Self-Employed Borrowers in 2024

Self-employed borrowers, freelancers, and independent contractors often face hurdles when applying for a mortgage. It can be challenging when traditional lenders overlook the unique aspects of your income, which might leave you feeling uncertain and discouraged.

If this sounds like you, there’s good news: 1099-income-only mortgages are designed specifically for people like you, making homeownership within reach without the red tape of traditional loans.

In this article, we’ll explain everything you need to know about 1099 income-only mortgages in 2024—how they work, what’s required, and how Gustan Cho Associates can help you secure one.

Why Do Self-Employed Borrowers Struggle With Traditional Mortgages?

If you are self-employed, you may have faced challenges when attempting to secure a conventional mortgage. The reasons are quite clear:

1. Tax Write-Offs Lower Your Taxable Income: Using the federal tax loophole in writing off unreimbursed business expenses often leads to 1099 wage earners not being able to qualify for a mortgage. Many independent contractors use tax deductions to reduce their taxable income. While this saves money at tax time, it creates problems when lenders use that reduced income to calculate what you can afford.
2. Strict Income Documentation Requirements: Traditional loans like FHA, VA, USDA, and conventional mortgages require two years of tax returns, W-2s, and pay stubs. These requirements don’t work for 1099 earners who lack standard payroll documentation.
3. Debt-to-Income Ratio Challenges: When lenders calculate your debt-to-income (DTI) ratio, your deductions often make it seem like you earn less than you do, pushing your DTI too high to qualify.

Fortunately, 1099 income-only mortgages provide a solution, allowing lenders to evaluate your true earning potential without relying on tax returns.

What Are 1099 Income-Only Mortgages?

A 1099 income-only mortgage is a specialized loan for individuals who earn income reported on IRS Form 1099 instead of W-2s. These loans cater to self-employed borrowers and independent contractors, such as:

• Freelancers
• Real estate agents
• Mortgage loan originators
• Gig workers
• Consultants
• Seasonal workers

Unlike traditional loans, these mortgages don’t require tax returns or pay stubs. Instead, lenders use your 1099 forms to verify your income, making the process more straightforward for self-employed individuals.

How Do 1099 Income-Only Mortgages Work

The process for qualifying for a 1099 income-only mortgage is simple compared to traditional loans. Here’s how it works:

1. Income Calculation: Lenders assess your income based on your 1099 forms. Generally, they consider approximately 90% of your total 1099 income over the last 12 to 24 months to evaluate your qualifying income. This approach helps create a clearer picture of your financial status.
2. No Tax Returns Needed: Unlike traditional loans, you don’t need to provide tax returns. This is a huge benefit if your taxable income is significantly lower due to write-offs.
3. Bank Statements May Be Required: Some lenders ask for 3-6 months of bank statements to verify your income deposits.
4. Flexible Terms: These loan options typically feature adaptable terms, including 30-year fixed rates and adjustable-rate mortgages (ARMs). This flexibility allows borrowers to choose the plan that best aligns with their financial needs.

What’s New for 1099 Income-Only Mortgages in 2024?

In 2024, lenders will offer even more competitive terms for 1099 income-only mortgages. Here are the latest updates:

• Higher Loan Limits: Borrow up to $3 million for properties like single-family homes, townhomes, condos, or 2-4 unit multifamily properties.
• Lower Credit Score Requirements: Some lenders now accept credit scores as low as 620, making these loans accessible to more borrowers.
• Faster Closing Times: Streamlined underwriting processes can get you to the closing table in as little as 2-3 weeks.
• No Prepayment Penalties: Pay off your loan early without incurring extra fees.

Who Qualifies for 1099 Income-Only Mortgages?

To qualify for a 1099 income-only mortgage, you’ll need to meet these basic requirements:

1. Stable Income: You must have consistent 1099 income for at least two years. Some lenders may accept one year of income if it’s strong and stable.
2. Credit Score: A minimum credit score 620 is generally needed for approval. Furthermore, a higher score can significantly enhance your chances of obtaining more favorable interest rates.
3. Bank Statements: Lenders may ask for recent bank statements to verify your income deposits.
4. Down Payment: When it comes to down payments, it’s important to note that you may be required to provide 10-20% based on your lender’slender’s requirements and credit history.
5. Employment Verification: You must prove you’ve been in the same line of work or business for at least two years.

Benefits of 1099 Income-Only Mortgages

1099 income-only mortgages offer several advantages for self-employed borrowers:

• No Tax Return Hassle: Skip the headache of explaining your deductions and taxable income.
• Higher Borrowing Power: Lenders use your gross 1099 income, giving you more buying power.
• Flexible Terms: Choose from fixed-rate or adjustable-rate options to fit your financial goals.
• Faster Approvals: With fewer documentation requirements, the approval process is quicker than traditional loans.

Steps to Apply for a 1099 Income-Only Mortgage

Applying for a 1099 income-only mortgage is straightforward. Follow these steps to get started:

1. Find a Mortgage Broker: Work with a broker like Gustan Cho Associates, specializing in alternative loan programs.
2. Gather Your Documents:
   • 1099 forms for the past 1-2 years
   • Bank statements (3-6 months)
   • Proof of employment or self-employment
3. Submit Your Application: You can apply either online or in person to get started. To streamline the process, ensure you have your required documentation ready.
4. Underwriting: The lender will review your income, credit, and other factors to determine your eligibility.
5. Close Your Loan: Once approved, sign your loan documents and close on your new home or investment property.

Why Choose Gustan Cho Associates for 1099 Income Only Mortgages?

At Gustan Cho Associates, we specialize in helping self-employed borrowers achieve their homeownership dreams. Here’s why we’re the best choice for 1099 income-only mortgages:

• Expertise: Our team recognizes the distinct hurdles that 1099 earners face. We are here to support you and provide clear guidance throughout each stage of the process.
• Flexible Options: We offer a variety of 1099 income-only mortgage programs to fit your needs.
• Fast Approvals: Our streamlined processes ensure quick turnarounds so you can close on your home faster.
• Nationwide Availability: We work with borrowers nationwide, offering competitive rates and personalized service.

Take the Next Step Today

If you’ve been denied a traditional mortgage or feel overwhelmed by the process, a 1099 income-only mortgage could be the solution you’ve been looking for. With flexible terms, no tax return requirements, and faster approvals, it’s never been easier for self-employed borrowers to qualify for a home loan.

Ready to get started? Call or text Gustan Cho Associates today at 800-900-8569 or email alex@gustancho.com to explore your options and take the first step toward homeownership. Apply now and discover how easy it can be to secure a mortgage tailored to your needs.

Frequently Asked Questions About 1099-Income-Only Mortgages:

Q: What is a 1099 Income-Only Mortgage?

A: A 1099 income-only mortgage is a loan designed for self-employed borrowers, freelancers, and independent contractors. It uses 1099 forms instead of tax returns to verify income, making qualifying for a home loan easier.

Q: Who Can Qualify for 1099 Income-Only Mortgages?

A: People earning a 1099 income, like freelancers, real estate agents, gig workers, and consultants, can qualify. You need at least one to two years of consistent income and a credit score of 620 or higher.

Q: Do I Need to Provide Tax Returns to Qualify?

A: No, you don’t need tax returns for 1099 income-only mortgages. Lenders use your 1099 forms and may ask for bank statements to verify income deposits.

Q: How is My Income Calculated for a 1099 Income-Only Mortgage?

A: Lenders typically calculate your income as 90% of the total 1099 income from the past 12 or 24 months. This provides a clearer view of your actual earnings without tax deductions.

Q: What Kind of Properties Can I Buy with a 1099 Income-Only Mortgage?

A: With a 1099 income-only mortgage, you can purchase single-family homes, townhomes, condos, or 2-4-unit multifamily properties. Some programs also allow investment properties.

Q: What are the Down Payment Requirements?

A: Many lenders typically ask for a down payment ranging from 10% to 20%, influenced by your credit history and overall financial situation. Additionally, making a bigger down payment can help you qualify for a more favorable loan condition.

Q: Are Interest Rates Higher for 1099 Income-Only Mortgages?

A: Interest rates are higher compared to conventional loans; however, there are still competitive options to explore. In particular, you could qualify for favorable rates if you maintain good credit and a strong financial profile.

Q: Can I Get Approved if My Credit Score is Low?

A: Absolutely, numerous lenders are open to accepting credit scores starting at 620. However, it’s important to note that a higher credit score can greatly enhance your chances of being approved and grant you access to better loan terms. By trying to improve your credit score, you position yourself for better financial opportunities.

Q: What are the Benefits of 1099 Income-Only Mortgages?

A: These loans are tailored to self-employed borrowers. They don’t require tax returns, offer flexible terms, allow higher borrowing power based on gross income, and have faster approval times than traditional loans.

Q: How do I Apply for a 1099 Income-Only Mortgage?

A: To apply, gather your 1099 forms, bank statements, and proof of self-employment. Work with a mortgage broker like Gustan Cho Associates, who can guide you through the process and connect you with lenders offering this program.

This blog about “1099-Income-Only Mortgages” was updated on December 10th, 2024.