Home loans for self-employed and 1,099 income borrowers

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If you are paid with 1099 income, or you are self-employed and not eligible for a regular loan, FHA or VA loan, there are other options. There are loan products specifically for those who are not regular, day-to-day W-2 income recipients.

For borrowers who are paid commissions or receive 1,099 loans per year as an independent contractor, 1,099 loan products can be used for primary, holiday home or investment housing. The minimum loan amount is USD 100,000. Gift funds are allowed if the borrower pays 5 percent of the purchase price. Sellers can help with closing costs of up to 3 percent.

Income must be documented for a two-year period, but it may still qualify if the borrower changed income from W-2 to 1099 income in the last 24 months while doing the same type of work.

Some examples of what this loan can be used for are an initial home purchase, a 90 percent total loan, up to 50 percent debt-to-income, and a credit rating of at least 680.

Self-employed borrowers can qualify for loans just like W-2 recipients in terms of loan to value, debt to income ratio, and credit scores. The only difference is in calculating income. Eligible income on List C is net income plus depreciation, commercial use of the home, and some mileage.

Self-employed borrowers using bank statements can base loans using deposits on bank statements from the past 12 or 24 months, personal or business. One of the borrowers must earn the main income through self-employment, and that borrower must own 25 percent or more of the business.

Gift funds are allowed after the borrower has contributed 5 percent to the transaction. Sellers can contribute up to 3 percent of the purchase price to cover the borrower’s closing costs.

Examples of how this loan can be used: an initial home purchase, a 90 percent loan of an amount, up to 50 percent debt-to-income ratio, and a credit rating of at least 660. Initial rate / urgent refinancing, 85 percent loan before value and minimum credit rating 660. Buying a vacation home or investment and refinancing for a term, 80 percent loan to value, 50 percent debt to income and a minimum of 680 credit points.

Joanne Moore is a Licensed Mortgage Provider, NMLS # 165477, for The Mortgage Market of Delaware LLC, Georgetown. For more information call 302-855-1306 or 302-236-1229 or email. MMODJoAnn@aol.com

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