Are you an independent contractor or employee earning 1099 wages? Have you tried applying for a mortgage with your local bank or credit union and been denied because you didn't show enough on your tax returns?

Most traditional home loans, such as Conventional, FHA, VA, Jumbo and USDA loans, do a poor job of serving applicants who earn their income through 1099 wages.  On a traditional home loan, the lender is restricted to using only the taxable portion of the applicant's wages for qualification purposes.  

Being a 1099 wage-earning employee means that you are simultaneously both an employee and a business owner when your file your income taxes.

Many 1099 wage earners hire a tax advisor to maximize the use of the self-employed rules in the US tax code to minimize their tax burden, which saves them thousands of dollars in taxes. (and who doesn't want to save money?)  Unfortunately since their taxable income is substantially reduced--a traditional lender is restricted to using only the taxable portion of your income for qualification purposes, often resulting in a frustrating process, and in many cases, a loan denial.

To put it another way, if the IRS thinks that you're 'broke' on your tax returns, then most lenders will probably see the same thing and that's rarely a good thing when you're trying to obtain a loan.

THE SOLUTION: THE 1099 INCOME PROGRAM

Using our 1099 Income Program, we see things differently.  Instead of your tax returns, we use your wages from your 1099 as the qualifying income for your new home loan, along with two basic verification steps.  

HERE'S HOW IT WORKS:

You must be working at the same business for at least 2 years or longer. We can calculate the income based on either a 2 year 1099 average, or simply on the most recent year's 1099.  

Let's look at the 2 year approach:

1. Provide your 1099's for the most current 2 years for the same employer. We divide the total figure by 24 months.

2. Your employer provides a letter confirming your date of hire, and that you have no mandatory job-related expenses.

3. YTD Bank Statements (for the bank account where you deposit your payroll)

If everything checks out in steps 2 and 3, then we'll use the income in step 1 as the income for your new home loan.

If we are using the 1 year 1099 approach:

Simply go back to step one,  and divide the income on your most recent 1099 by 12 months. If steps 2 and three check out, then this becomes the income figure for your new home loan.