Best Loan For Independent Contractors | 1099 Loans

1099 loans. The best loan for independent contractors. Hey, what's going on everybody? It's Jeff Travartha and Jeff the Mortgage Bro. I hope you guys are doing really well today. I've got a good one I'm going to talk about a little bit about 1099 loans today. These are great loans to do and these even apply to someone like me who is an independent contractor. So one of the things that this allows you to do is to buy property when you're self-employed, if you don't use a bank statement program or if you don't have a P&L that's prepared, then this is an option for you. This is really great for people like Realtors, people like financial advisors, mortgage brokers, all these types of people might be good candidates for someone to do a 1099 loan. So technically you're self-employed, but at the same time, maybe you work for somebody else and you don't necessarily have your own business, but you still get paid as if you have your own business or you're paid on commission only type of a thing. So lots of good people out there that can qualify for this type of a loan. The problem is the taking advantage of tax write-offs is the biggest thing when we're self-employed. So if you are self-employed, you know that you probably want to have a good accountant. That good accountant is going to help you minimize the amount of tax that you pay going forward. And oftentimes when you do that, regular conventional lenders, when they look at your tax returns, they're gonna be like, oh, you don't make any money because they only want to lend you money on what you pay tax on. But the 1099 loan is not like that. It's going to be based on the actual income that you bring in. And then we're going to use a very small expense factor ratio of 10% when we're doing a 1099 loan. So if you make a hundred thousand dollars, 10% of that is going to be $90,000. And that's what we would use for your income. So a really cool way to qualify if you are into that category of a 1099 type of a person. So let's go through some of the parameters of this type of a loan. We can do loan amounts up to $3 million with this. So depending on what type of a 1099 income, you can qualify all the way up to a $3 million loan. This is for purchases, for rate and term refinances, and for cash out refinances. This is for primary residences. This is for second homes. This is for investment properties. You can buy any type of a property like that with a 1099 loan. You can buy any type of property like a single family, a condo, a townhome, PUD. You can buy multi-family property with these types of loans as well. And again, whether it's owner occupied or not owner occupied, you can still do that. And you can use one or two years worth of your 1099s. So if you made a lot of money last year and then not so much the year before, maybe it's just one year. But if you made a lot of money the last couple of years, maybe you want to have a little bit more stable, we're going to use the last two years with your 1099. And that's going to give you a little bit better pricing on that. Maybe a little bit better rate if you go for two years worth of 1099, especially if you have consistent income. So the different types of loans you can do, you can do a 30-year fix with this, you can do a 40-year fix, and there's even ARM products available. What I find is that the ARM pricing isn't that much better than the fixed option. So most of the time I usually recommend a fixed option for most clients, but those are available. If you want to really minimize the amount of money that you're paying every month, there is an interest-only option that you can use. And interest-only is something that allows you to just do what it says, make interest-only payments on your loan. So maximize the amount of cashflow that you have. So whether it's from your job or if it's a mess of property, the money coming in on the property. So interest-only is definitely available. As little as three months reserves, I typically like to have six months of reserves for most of my clients. Remember, a reserve is just the principal interest tax and insurance monthly payment multiplied by however many months we need for reserves. So six months of reserves is what we're going to need for the PITI typically. And that can be in stocks or bonds or checking or savings accounts or 401ks or IRAs or all sorts of different vehicles that money might be somewhat liquid that we can use as reserve accounts. So don't discount that. If you have retirement accounts and things like that, you can definitely use those things for reserves for these types of loans. And that's not money that you put into the transaction, just money that is available should something happen and you can't make a payment for the month, then this is something that is required by most lenders for these types of loans and for a lot of different types of loans as well. So not just this type of loan. We can go up to 90% loan-to-value. So with a 1099 loan, you can go as little as 10% down. Now that's typically going to be for an owner-occupied property, probably one, maybe two units for a 20% down. But at the same time, that's pretty darn good deal. So 10% down minimum for these, they don't have mortgage insurance. So that's another benefit, but the rate might be on the higher side if you're not putting 20% down, but just know that, that you can do as little as 10% down on these types of loans. The credit scores go down to 640. So your terms might not be as good, but you can still do a 1099 loan if you're an independent contractor for as little as a 640 credit score. Obviously, the better your credit is, the better this is going to be for you going forward. You can have less than a two-year self-employment history. So maybe you work for somebody else as a financial advisor and you had income coming in as a W-2 type of a role, and then you switched over to having your own business and it's a 1099, you only need a minimum of one year typically. So less than two years is okay with this type of product, which I think is a sweet deal because you never know when the right opportunity is for you to be able to buy houses. There are no prepayment penalties on this product. So this is not like a DSCR loan. This is one that is typically used for owner-occupied properties is where I see it the most, but there's no prepayment penalty, whether you buy an investment property or you're buying a primary residence or a second home, there's no prepayment penalties on this. So typically we like to have you hold the loan for at least six months before you refinance it or sell the property. And that just helps us to not get in trouble with our lenders. So hopefully you can keep the loan for six months if you decide to get one. Rates are a little bit higher than this. And the reason being is just because of the flexibility of the way this allows you to qualify. So you're going to be above market, whatever those rates are for the conventional loans. You can take a look online and see what those are, but just understand that these are going to be definitely a little bit higher. I would say maybe a half of a percent higher, so not a lot higher, but a little bit higher. And again, that comes with the flexibility that these allow you to qualify for these different types of properties. So if you're a self-employed person and you have a 1099 or, and you're an independent contractor, I'd love to be the one that helps you out with this. Do me a huge favor. Let's talk more about it. Let's go ahead and have you click on the calendar link down below in the description. And then if it's something you want to talk about, I'd love to be the one that helps you no matter where you are in the U S so please reach out to me. Thanks so much for watching. And I look forward to chatting with you next time. Have a good day, guys.