1099 Wage Earner Guidelines On Home Mortgages
This ARTICLE On 1099 Wage Earner Guidelines On Home Mortgages Was PUBLISHED On September 15th, 2020
Independent Contractors and 1099 Wage Earner Guidelines can qualify for a home.
- However, workers need to have at least two years working as an independent contractor and/or 1099 wage earner
- 1099 wage earner guidelines are the same as self-employed borrowers
- 1099 wage earners get to deduct many unreimbursed business expenses which is great in not paying as much taxes to the government
- However, it is not good when they need to apply for a mortgage
- Mortgage underwriters will thoroughly review the borrower’s two years of income tax returns
- Declining income will be closely scrutinized
- Major fluctuations in income will also be a concern for underwriters
- Mortgage underwriters want to see increasing income as well as a continuation of income for the next three years
- The qualified income mortgage underwriters will go off is the adjusted gross income after all unreimbursed business expenses
- Gustan Cho Associates is a national mortgage company with no lender overlays who are experts in helping independent contractors and 1099 workers qualify for a home mortgage
In this article, we will discuss and cover 1099 Wage Earner Guidelines On Home Mortgages.
1099 Wage Earner Guidelines: How Lenders View 1099 Income Earners
The main reason many 1099 and self-employed homebuyers cannot qualify for a home mortgage is due to the large unreimbursed business expenses they expense on their income tax returns.
- By doing so, the adjusted gross income gets greatly reduced which affects qualified income
- 1099 wage earners can use non-occupant co-borrowers if they have high debt to income ratios
- Gustan Cho Associates has alternative finance programs such as non-QM loans for self-employed borrowers
- No income tax returns are required on bank statement loans for self-employed borrowers
12 or 24 months of bank statement deposits are averaged and that figure is used as the qualified income.
1099 Wage Earner Guidelines And Challenges
1099 wage earners and self-employed borrowers benefit from writing unreimbursed business expenses off their income tax returns.
- Therefore, they benefit from not paying as much taxes
- Many independent contractors can report a lower reported income and many times a loss
- On the flip side, this hurts them when they apply for a mortgage with such low income
- Government and conventional loans as well as other home mortgage programs go off the adjusted gross income after unreimbursed business expenses
Many workers in the construction and sales fields are 1099 independent contractors.
Common Independent Contractor Jobs
Common jobs that pay workers via 1099 versus W-2 are the following:
- Real estate agents
- Car Sales People
- Masonry workers
- Electricians and Plumbers
- Restaurant personnel
- Construction subcontractors
There are strict labor laws on who can be classified as independent contractors versus employees (W-2 wage earners).
1099 Wage Earner Guidelines Versus W2 Income Mortgage Guidelines
It is easy to calculate income for W2 wage earners. Whatever the salary and/or wage is on the employment offer letter, lenders will go off by that. W2 income wage earners can qualify for W2 income only mortgages. No income tax returns are required and only the W2 income will be used for qualification. If independent contractors cannot qualify for a government and/or conventional loans due to a lot of write-offs, they may need to consider adding non-occupant co-borrowers to qualify. Or they may need to seek other alternative home mortgage programs such as the bank statement loan program offered at Gustan Cho Associates.
Jammi Cash of Gustan Cho Associates is an expert in helping independent contractors and self-employed borrowers. Jammi said the following:
Bank statement mortgages were created to assist self-employed independent contractors and 1099 employees to qualify for a mortgage. While there are regulations requiring lenders to make sure borrowers have the ability to repay the loan, this mortgage program was created as an alternative to help them to qualify. This mortgage program essentially asks contractors to provide bank statements proving there is a flow of money (deposits) coming into their business or personal banking accounts. Lenders will use a portion of these deposits as their monthly income on the loan application without requiring tax returns. Traditionally, lenders will require self-employed individuals to use the average net income or loss over the past two years. Many contractors attempt to hold back on their tax write-offs for two years to their reported income is higher helping them to qualify. We are not giving tax advice here so if this is something you are considering, then please consult your accountant. 1099 employees have the same tax benefits when it comes to writing off expenses, but then also face the same challenges when applying for a mortgage. For 1099 employees applying and qualifying for a mortgage is the same as someone who owns their own business. The best option for a 1099 employee who reports a low net income is the bank statement loan.
Gustan Cho Associates are experts in helping 1099 wage earners and independent contractors qualify for a home mortgage. To qualify for a mortgage with a national mortgage company licensed in multiple states, please contact us at Gustan Cho Associates at 262-716-8151 or text us for a faster response. Or email us at email@example.com. The team at GCA Mortgage Group is available 7 days a week, evenings, weekends, and holidays.