Mortgage Solutions for 1099 Independent Contractors

Buying a home is a tremendous step in anyone’s life, and the process can sometimes seem overwhelming. This can be especially true for home buyers who don’t fit the typical mold when it comes to getting a mortgage. For buyers with traditional W-2 employment, mortgage solutions are plentiful; however, for 1099 earners, finding the right financing plan can be a challenge. At Luxury Mortgage, we aim to help buyers of all income scenarios achieve homeownership success. That’s why we’re pleased to offer mortgage solutions for 1099 independent contractors, self-employed borrowers and borrowers who own a business.

1099 Independent Contractors

Did you know that nontraditional employment accounts for a large and rapidly growing segment of new jobs? The so-called gig economy, which consists of freelance, contract and contingent employment arrangements, consisted of roughly 60 million workers last year and is still growing.

So what exactly is a 1099 worker or independent contractor? In simplest terms, a 1099 worker is someone who is self-employed and performs work on a contract basis for a person, company or firm. At the end of the year, the 1099 worker will receive a 1099 tax form from the person or entity that paid the worker for their service or product. The person paying the worker is usually responsible for generating the 1099 form and sending copies to both the worker and the IRS.

Why Traditional Mortgages May Not Be Ideal for 1099 Earners

Due to the rapidly changing employment landscape in the US, other industries (such as mortgage and real estate) are finding new and innovative methods and products to help meet these workers’ needs.

While traditional mortgages often catered to traditional home buyers, i.e. W-2 employees, lenders who wish to stay competitive and continually grow their business are now offering nontraditional home loan options to cater to the nontraditionally employed. Home buyers who are 1099 earners for instance, may have a harder time qualifying for a conventional mortgage (or may not qualify for the most favorable interest rates). Loan products that are less restrictive when it comes to showing consistent income documentation may be a better solution for such workers.

Mortgage Solutions for Independent Contractors and Freelancers

The nature of 1099 earners’ income is sometimes anything but steady. An independent contractor may have a year where the first six months are great and business is booming, but the last half of the year is slow. Likewise, workers who rely on seasonal business may experience even more drastic highs and lows throughout any given year. Therefore, showing proof of consistent monthly income may be difficult.

Fortunately, there are mortgage options that are more forgiving when it comes to income documentation. A bank statement loan is one example. At Luxury Mortgage, we offer the Bank Statement Qualifier Loan, a unique mortgage product that allows for qualification based on balances in deposit bank accounts instead of a W-2 or tax return.

In addition, the Bank Statement Qualifier Loan allows credit scores as low as 580 and borrowers can borrow up to 80% of the home value. This flexible mortgage option makes it easier for borrowers without traditional income to obtain competitively priced financing that works for their scenario.

Other Loan Options for Self-Employed/Contract Workers

If the Bank Statement Qualifier Loan doesn’t sound like quite what you’re looking for, you may want to consider these other options:

Asset Qualifier Mortgage (use assets to qualify instead of providing income documentation)

Investor Cash Flow Mortgage (ideal for investment property purchases; use the property’s cash flow to qualify)

Explore our other mortgage options here.