1099 earnings VS. W2 earnings

12 Replies

Hello, Bigger Pockets Family,

I am a new investor, and I'm trying to get pre-qualified for a mortgage, preferably FHA cause those have the lowest down payments, and also tend to have a lower interest rate, and cash on cash return is important in my investment strategy.

I am a contract employee so I receive a 1099 instead of a W2, the bank I went to Provident Bank,  will only lend to me based on the amount I paid taxes on, from my 1099, and I try to pay as little taxes as possible, just like Donald Trump. so my Pre-qualification is pretty low for investing in New Jersey where I live.

 Are there Financial institutions that are friendlier to lending to folks with 1099's?

Please help, I want bags of cash, to help me with my investing.

Unfortunately as far as the conventional route goes that's the way it is. 

They can only base your income qualification off what you show on paper.

I'd suggest meeting with some other small local banks and credit unions to see their options.

I'd also suggest that you look into commercial loan programs which have more flexibility.

@Luiny Tavares - You can qualify for an FHA loan using 1099 income (I am assuming you will be an owner occupant of this property). The lender I used in New Jersey can help you out. I can message you his details.

@Luiny Tavares FHA will be an issue if you can't qualify on your net adjusted income. You might want to look into a bank statement program but the terms will be higher than FHA or Conventional.

@Melvin List what is bank statement program, I assume the bank looks at your bank statement instead of your net adjusted income, and where can I look for those lenders?

Originally posted by @Luiny Tavares :

@Melvin List what is bank statement program, I assume the bank looks at your bank statement instead of your net adjusted income, and where can I look for those lenders?

 Anyone licensed to broker mortgages is inundated with spam from these end-lenders. 

They aren't often spoken of because their rates are so far off the gov't subsidized rates you see advertised everywhere that 99% of consumers balk, ergo it's not the highest and best use of anyone's time to learn them well. 

If you want to get someone to open their spam folder to shop it, I'd lead the conversation with "I'm looking for an alternative to hard money, here is all my paperwork and you have my consent to run my credit."

Include 24 months of bank statements with that paperwork. Some bank statement products require 12 months, some 24.

@Chris Mason, thanks for the heads up. if someone tells me that 75% of the rental income can be used to qualify me, should I be concerned?

Originally posted by @Melvin List :

@Luiny Tavares FHA will be an issue if you can't qualify on your net adjusted income. You might want to look into a bank statement program but the terms will be higher than FHA or Conventional.

Out of curiosity what is the minimum income required in order to qualify for FHA and/or conventional financing?

@Brian Garrett there is not a minimum income but it sounds like he is trying to get approved based on his gross income and not net adjusted income.  

Originally posted by @Melvin List :

@Brian Garrett there is not a minimum income but it sounds like he is trying to get approved based on his gross income and not net adjusted income.  

Interesting I always figured there was a minimum income requirement of some sort in order to qualify.

So anyone who can produce a 1099 or W2 that shows any sort of net income can qualify based off that amount?

Obviously we know they also check credit, DSCR, etc. I'm just talking about qualifying for FHA & conventional financing.

Originally posted by @Melvin List :

@Brian Garrett as long as the income is file with the IRS on their personal tax returns

Good to know!

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