1099 Loan

Caters to borrowers with non-traditional income documentation. Instead of pay stubs or tax returns, we use 1099’s. May require a higher credit score or down payment.

Guidelines:

  • Must be self-employed working in the same line of work for 2+ years.

  • No Tax Returns required.

  • Minimum Credit, 640, (up to 75% LTV).

  • Maximum LTV, 90% with 720+ Credit.

  • Loans $150,000 to $3M.

  • Usage: Purchase, Cash-out, Rate-term refinance.

  • Home Types: Primary, second homes, and investment properties.

  • No tax returns are required.

  • Two years' seasoning for foreclosure, short sale, bankruptcy or deed-in-lieu.

  • Most recent one or two years' 1099 plus year to date earning statement.

  • Year to date earnings are verified from earning statement, paystubs, or bank statements.

  • 1099s must be from a single employer and issued in the borrower’s personal name.

  • Income Calculation:

    • Use the most recent one or two years of 1099s.

    • A 10% expense factor is applied to the 1099 income for calculating net income.

    • If gross receipts are stable or increasing, use a 24-month average of net income. If declining, use a 12-month average.

    • The income trend should be stable or increasing; if declining or irregular, additional documentation may be required.

  • Co-Applicant Options:

    • Full documentation from a co-applicant can be used alongside 1099 income.

  • Other Income Sources:

    • Rental income can be used, utilizing 75% of the current lease income less PITIA.

    • Supplemental income sources like social security, pension, alimony, child support, asset distribution/utilization, and second income can be used if they meet history and continuance requirements.

  • Asset Accounts and Gifted Funds:

    • Use 100% of cash and cash equivalents, 80% of non-retirement assets, and 70-80% of retirement assets depending on age.

    • Business funds can be used if the applicant owns at least 50% of the business, with proper documentation.

    • Gift funds are allowed for closing, with specific requirements for documentation and contribution.

  • Liabilities:

    • Alimony can be deducted from income if tax-deductible; otherwise, include as a liability. Child support must be included as a liability.

  • Documentation Requirements:

    • Provide the most recent one or two years of 1099s, documentation of year-to-date income within 120 days of the note date, and 1099 transcripts.