Navigating Mortgage Loans with 1099 Statements Only
When it comes to obtaining a mortgage loan, there are several requirements that borrowers need to meet. One of the most important is proving their income. Traditionally, this has been done through W-2 statements. However, for individuals who are self-employed or work in the gig economy, their income is often reported on a 1099 statement. This can make it more challenging to secure a mortgage loan, but it’s not impossible. In this blog post, we’ll explore what 1099 statements are, why they can be an obstacle, and how to navigate the mortgage loan application process when you have 1099 statements only.
What are 1099 statements?
A 1099 statement is a tax form that reports income paid to independent contractors or freelancers. Unlike W-2 statements, which employers are required to issue to their employees, 1099 statements are not mandatory for all businesses. This means that if you’re self-employed or work in the gig economy, you may not receive a 1099 statement from all of your clients. However, you are still required to report all income earned on your tax return.
Why can 1099 statements be an obstacle?
The main issue with 1099 statements is that they don’t provide the same level of detail as a W-2 statement. Specifically, 1099 statements only report income earned, whereas W-2 statements also provide details on taxes withheld, benefits, and other deductions. This means that lenders may be hesitant to approve mortgage loans for individuals with 1099 statements only, as they may be concerned about the borrower’s ability to repay the loan.
How to navigate the mortgage loan application process with 1099 statements:
Get your paperwork in order: Before you begin the mortgage loan application process, make sure you have all of your financial documents organized and easy to access. This includes your tax returns from the past two years, as well as any 1099 statements you’ve received.
Consider a bank statement loan: A bank statement loan is a type of mortgage loan that relies on bank statements instead of W-2 or 1099 statements to prove income. This can be a good option if you don’t have a steady income stream but have a history of consistent deposits into your bank account.
Work with a lender who specializes in self-employed borrowers: There are mortgage lenders who specifically cater to self-employed borrowers and are familiar with the challenges that come with 1099 statements. They may have more lenient income requirements or be able to provide more personalized guidance.
Make a larger down payment: If you’re having difficulty securing a mortgage loan with 1099 statements, consider making a larger down payment. This can show lenders that you’re serious about the investment and can help offset any concerns about your income stream.
Conclusion:
Navigating the mortgage loan application process can be challenging, especially if you’re self-employed or work in the gig economy. However, with careful preparation and a bit of research, it’s still possible to secure a mortgage loan with 1099 statements only. By getting your paperwork in order, considering a bank statement loan, working with a specialized lender, and making a larger down payment, you can increase your chances of being approved for a mortgage loan and achieving your homeownership goals.