When it comes to obtaining a home loan, how you earn your income will play into the qualification standards for your new home loan.
For someone who receives regular pay stubs and is a W-2’ed employee of a company, the process is generally pretty straight forward. Lenders will use your hourly or salaried monthly earnings for qualification and in most cases, will only need to see your pay stubs and year end W-2’s.
However, for those that the receive a 1099 from an employer or are self-employed, the standards are a little different. In this case, lenders will require to see year-end tax returns and will often times reduce your income by any write offs associated with deductions from your employment earnings.
In today’s article we will discuss the process of qualifying for a home loan if you are 1099’d or self-employed and some recent changes that now make it easier to qualify for a home loan.
If you receive a 1099 for your income or you are self-employed, then the first item most lenders will ask for, will be copies of your most recent Federal Tax Returns.
These returns will be analyzed and any business expenses or write offs associated with and claimed on your tax returns will be generally be deducted from your income for loan qualification purposes. Or in other words, you’re qualifying income that you can use will often times be very close to your adjusted gross income, as claimed on your tax returns.
In the past, two years’ tax returns were often needed, but more often than not, you will now only need to provide your most recent one years’ tax returns.
This is a positive development, because in the past, if your business was trending upward in earnings, you would have to average your most recent two years’ returns. Now, only the most recent years’ return is often times needed.
Even though you income qualification generally will go off of one years’ tax returns, it is still necessary to prove a two year work history of self-employment.
Often times this can be proven through business licenses or even a CPA letter, that will provide third party verification of your business. If you are 1099’d a verification of employment from your employer will suffice for this as well.
In the end, if you receive 1099 income or are self-employed and trying to qualify for a new home loan, it is best to sit down with a licensed mortgage lender, such as Strategic Mortgage and have your tax returns and documentation reviewed properly. This will allow you to properly pre-qualify for a new home loan and see all available options for your specific situation.
For more information on current home loan programs and options for existing and potential home owners, please contact Bill Kamboukos of Strategic Mortgage at (480) 219-3682 or by emailing: firstname.lastname@example.org or online at www.strategicmtgaz.com
Vasilios Kamboukos – NMLS#160440