Hello BP community, I recently just road-tripped from Portland, Oregon to Columbus, Ohio to start building my real estate portfolio here. However, I've just come across a huge hurdle. I received my job letter and it's a 33K annual salary but it's a 1099. I am a recent college graduate so I was hoping to use my prior college experience to fulfill the two years of work experience. However, after talking to a lender, I was told this applies only to W2 positions, not 1099s. With a 1099, I absolutely need 2 years of work experience. I have over 6 figures in investment assets right now (cryptocurrency) and over 40K in fiat. I have the cash and assets to do a 20% down payment without issue. I am hopefully looking to do a HomePossible or 20% down payment. Are there any lenders who can provide me a pre-approval with my situation? Or what would you recommend me to do? Or should I try to find a local credit union? Would love to get some advice and insight on what to do. If there are any Cbus investors out there, I'd love to get your recommendations especially

HI @Jimmy Lieu! 1099 income is considered self-employment. The Fannie Mae guidelines for curation of self-employment are here and Freddie Mac's are here. In a nutshell: • Self employment with less than 12 months of duration cannot be used for a loan. • Self-employment income must show up on 1 full year of tax returns (so if you started today, your 2021 tax return would fall a little short of this). If you started 1/1/21 or earlier your 2021 taxes will do the trick. • Lenders must document that you have a 2 year history of work in a similar field. In theory your time in school could count if you studied something akin to what you are doing for work. • But (the rub), lenders also must document a 2 year history of income at the same or greater level. If you were a graduate student with a stipend or salary as a research assistant or teaching assistant you may be able to check this box. But if you were a full-time student and not working, you won't have income to show. My hunch is you'll need one of two things to happen for this job to work for loan qualifying... you'll either need to stick with it until you file 2022 returns or you'll need to talk them into bringing you on as a W2 employee. Alternate options for your purchase would be to have someone cosign for you (not anybody's first choice, I know) or (if you are buying an investment property (I'm not clear on that), but using a debt service coverage ratio loan (DSCR). These programs are designed to allow investors to purchase a rental property based strictly in the cash flow the property generates. Personal income is not verified or included in loan underwriting. Instead, the rent for the property (or in some cases a percent of the rent) needs to equal or exceed the PITI. These loans are not at the best terms, but they can be a great stop gap to get you into a property when traditional financing won't work. (And you can always refinance to improve the loan terms later.) BUT they are only available on investment/non-owner-occupied purchases. Hope that clarifies things a little... although I know this is probably not what you were hoping to hear! Julee

Quick aside to @Francois G. Lenders regularly use education in a related field as part of (even all of) a 2 year work history. It's most straightforward when the degree directly relates to the job: recent med school grad who's signed a contract with a hospital, engineer with a job at an engineering firm, accountant, RN, etc. But even in fuzzier cases this can work just fine: marketing and communications degree who is going into a customer service or sales position, for example. Back in the day, I was a philosophy major... I'd probably not gotten too far using my degree to show a two year history of experience in, well, anything. :) But most semi-professional degrees with a related(ish) field work just fine. And the DTI issues everybody raises are real... but not insurmountable. Once @Jimmy Lieu is paid via wages/W2. I'm working on a file right now for a guy who makes less. He's got a very low housing expense (super-low front DTI) and is buying a rental property so the rents are largely offsetting the PITI. Even his modest income keeps his DTI where it needs to be. I've even done a few loans for clients with zero income who had no primary housing expense (living with a partner/family), but are financing a cash-flow positive rental property and have little/no other debt. Fannie/Freddie rules for rental income recently tightened a little for scenarios like this, but they still doable if the borrower's situation checks the right boxes. Fun conversation... thanks everybody!

Hi Jimmy, it's going to be hard to get a conventional loan without two years of work history on a 1099. I would agree with Marc that a commercial lender might be the best option.

@Jimmy Lieu It sounds like you have resources and want to be in the local market...have you started your direct outreach to sellers?...acquiring through purchase money mortgage is going to be your best bet until you get squared away with your income to qualify for a loan.

@Jimmy Lieu taking a slightly more macro view, looks like you have done very well in crypto, and Columbus has lower priced properties....consider paying cash then refing at what are likely to be very favorable rates in the near future. Assuming you don't wipe out the crypto portfolio you have hedged that portfolio really well--now you own a stable asset with low rate fixed debt, and you would have many more options for refi, maybe popping the cash flow back into crypto. Can't speak to the tax consquences of course, but I'd give it some thought. Maybe you even wind up with a rental property HELOC...

Also, another option I heard is creating an Ohio LLC and then putting 1099 under this LLC. Then somehow paying myself through the LLC using payroll. Would that make it a W2? Is this a viable option at all or is there no such thing as that? - Yes but the UW would catch that and not count it

@Jimmy Lieu And a quick addendum. I just noticed I had to/from flipped in my mind. In Ohio your DTI won't be nearly as out of line as it would be in Portland. (I'll defer to the real estate brokers here, but thus far all of my clients buying in Ohio have spent tremendously less per door than my clients in Portland.)

@Jimmy Lieu seller financing ( the easiest) or portfolio lender. They are out there!

Hey Jimmy, I am an agent for the biggest brokerage in Columbus and would be happy to connect you to the right people and right agent within my network. I lived in Columbus last year but moved back home to the Cleveland area. Feel free to reach out to me and we can help. As far as lenders, I've learned that Cross Country Mortgage are very helpful and are able to help under most situations. You may be able to request an income based loan approval for 1099 workers like ourselves. I'll PM you my number and email.

Help getting a pre-approval with a 1099 job?Help getting a pre-approval with a 1099 job?

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Marc Rice

Real Estate Agent
Columbus Cleveland Dayton, OH

Marc Rice

Real Estate Agent
Columbus Cleveland Dayton, OH

Replied February 13, 2021 08:20

@Jimmy Lieu

You’ll want to use a commercial lender if you don’t have 2 years as a 1099. The other option is find a partner who has a W2 or 2 years of a 1099 to get the conventional fannie Mae loans.

You could always buy in cash too and refinance with a commercial lender at 70-80% LTV as well.

I’d recommend checking out LimaOne, Aloha Capital, or Wildcat Hardmoney Lending for the commercial route.

Marc Rice
[email protected]
614-363-2787

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