1099 for 5 year cant get financing

1099 for 5 year cant get financing

Brad SeidelPro Member
Rental Property Investor · Key west FL · Member since 2018 · 16 posts · 1 vote

My brother in law is trying to find a way into his first home that he wants to live in and cash flow. However his situation is a tad un-ortodox.

Positives:

  • Has 83k saved
  • This will be his first home
  • Makes around 110k per year pre- “business related deductions”
  • Has worked with the same company for the last five years
  • Knows he wants to invest in Taylor, Texas (76574)
  • Is ready to get into a house as soon as possible

Negatives:

  • He is a 1099 employee
  • His tax situation has his income reported as 40k~
  • Knows little or nothing on how to secure finances
  • Does Not have great knowledge about the area

Has anyone been able to figure out the best way to secure finances as a 1099?

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Sasha MohammedPro Member
Lender · Costa Mesa, CA · Member since 2018 · 337 posts · 245 votes
3y

There are lenders out there for him!

I have one lender that will go 100% off the 1099, no tax returns needed.

20% down payment, 50% max DTI, just need a 2 year history of 1099 from the same place (which sounds like he meets).

Dont get discouraged! 

Also since you mentioned DSCR - DSCR would mean he cannot live in it. Consider there being a giant wall between consumer financing (a house you live in) and investor financing (one you are not allowed to live in).

See this reply in the discussion

8 Replies

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  • Realtor · Los Angeles · Member since 2022 · 56 posts · 32 votes
    3y

    I'm a 1099 also and if I was in his position I would call every mortgage lender I could - what about an FHA loan?

  • Investor · WA · Member since 2023 · 8 posts · 4 votes
    3y

    Does he have anyone he could partner with? My wife has a 1099 and i'm a W2 we are currently going through the approval process. Perhaps a DSCR loan could help?

  • Member since 2023 · 1 post · 0 votes
    3y

    Hey all,

    A client of mine just showed me this site, so don't be discouraged by my lack of experience on Bigger Pockets!

    Would be happy to help all here. Any experienced lender is going to try conventional/FHA/USDA to get the best fit.

    For Brad, this most likely has to do with the after deduction income of 40K. When interest rates were in the 2-4% range, it was much easier to qualify someone at that income level. The good news for him is that it's tax season! Maybe we can find a way to bump up his 2022 numbers, and then be able to qualify. 


    DSCR loans are great, but there are some negatives. Usually these are only reserved for clients that are buying investment properties, the rates are higher than a conventional loan, and the fees are as well. I would recommend doing anything you can to get a conventional/FHA loan first, then move to those outside-the-box loans.

  • Lender · Member since 2020 · 331 posts · 209 votes
    3y
    Quote from @Brad Seidel:

    My brother in law is trying to find a way into his first home that he wants to live in and cash flow. However his situation is a tad un-ortodox.

    Positives:

    • Has 83k saved
    • This will be his first home
    • Makes around 110k per year pre- “business related deductions”
    • Has worked with the same company for the last five years
    • Knows he wants to invest in Taylor, Texas (76574)
    • Is ready to get into a house as soon as possible

    Negatives:

    • He is a 1099 employee
    • His tax situation has his income reported as 40k~
    • Knows little or nothing on how to secure finances
    • Does Not have great knowledge about the area

    Has anyone been able to figure out the best way to secure finances as a 1099?


    Yes. I'm a mortgage broker and happy to help with this. We have bank statement programs for him as a self employed borrower where it doesn't go off of his tax returns. Also will he be filing his 2022s soon? Another option is I can help him with how the underwriters will calculate his income so he's prepared for when he files this year. 

  • Lender · Fort Worth, TX · Member since 2022 · 88 posts · 37 votes
    3y

    @Brad Seidel  I assume your Brother In Law wants to buy a home in Taylor to ride the value wave associated with the massive Samsung plant being built there.  I am a Texas lender and lived in Austin for 26 years, so I am very well aware of the development in that area.  There are plenty of options out there for 1099 employees.  Since he is a 1099 contractor, his adjusted Gross income of $40K may be adjusted to get to a higher number based on the type of deductions he took.  He may also choose to go with a bank statement loan.  This type of loan will have a slightly higher interest rate, but at least he will be able to buy a home assuming he qualifies on the other related components of the deal.  Let me know if I can help in any way.

  • Sasha MohammedPro Member
    Lender · Costa Mesa, CA · Member since 2018 · 337 posts · 245 votes
    3y

    There are lenders out there for him!

    I have one lender that will go 100% off the 1099, no tax returns needed.

    20% down payment, 50% max DTI, just need a 2 year history of 1099 from the same place (which sounds like he meets).

    Dont get discouraged! 

    Also since you mentioned DSCR - DSCR would mean he cannot live in it. Consider there being a giant wall between consumer financing (a house you live in) and investor financing (one you are not allowed to live in).

  • Sasha MohammedPro Member
    Lender · Costa Mesa, CA · Member since 2018 · 337 posts · 245 votes
    3y

    Dont get discouraged! There are lenders out there that think outside the box

    Bank statement program is one option, but I also have one lender that will go off of 100% of the 1099 income - NO tax returns needed.

    20% down, max 50% DTI, so long as you have a 2- year history with the same business (sounds like your guy meets this), we can use just the 1099 to qualify.

    There are lenders out there, it's just about finding the right fit for your needs.

  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    3y
    Quote from @Brad Seidel:

    My brother in law is trying to find a way into his first home that he wants to live in and cash flow. However his situation is a tad un-ortodox.

    Positives:

    • Has 83k saved
    • This will be his first home
    • Makes around 110k per year pre- “business related deductions”
    • Has worked with the same company for the last five years
    • Knows he wants to invest in Taylor, Texas (76574)
    • Is ready to get into a house as soon as possible

    Negatives:

    • He is a 1099 employee
    • His tax situation has his income reported as 40k~
    • Knows little or nothing on how to secure finances
    • Does Not have great knowledge about the area

    Has anyone been able to figure out the best way to secure finances as a 1099?


     Everyone else already talked about the alternative documentation loans with crummy terms/rates/fees. 

    Your brother could also get a little bit more, ahem, 'honest' about his expenses this year, before he files his taxes. 

    Generally for someone with good credit, and a 5+ year history of the same income source, many loan officers will know how to go off of only the most recent ONE year of tax returns. 

    Just saved you about 1.5% to rate and 1% to fees, you're welcome. :)

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