Can a Non-Qualified Loan Help If You Can’t Show Income?

By Kyle Koller

Producing Branch Manager of UMortgage West - The #1 Producing Team at UMortgage

Recently, a self-employed client reached out to me with a problem that many self-employed clients face: they wrote too much off in their business and couldn’t afford a conventional loan.

This client was making a lot of money and had numerous deposits every single month. These clients were also 1099 employees. So, we decided to look at two programs for them. The first was a 1099 loan, and the second was a bank statement loan. Let’s talk about it.

1. Income requirements. Non-QM loans, unlike conventional ones, have different income requirements. They focus on your bank statements or 1099 forms. With a bank statement loan, lenders mainly review your monthly deposits. For a 1099 loan, lenders look at your 1099 income.

2. Calculating income for loan approval. The calculations for these two options are different. For a 1099 loan, I can use up to 90% of your reported income, and a CPA letter can help confirm that for approval. For a bank statement loan, we’ll divide your deposits over 12 or 24 months to determine your income.

The great thing about these non-QM loans is that you can continue to write off expenses in your business while focusing on your deposits. You can apply for a non-QM loan every year when you want to buy a house.

3. Credit score and down payment. When looking for a non-QM loan, having good credit is a huge factor. Generally, you’ll need a score of 720 or higher, but a score of 760 is ideal for getting the best financing options. Another important factor is the down payment. You’ll typically want to have at least 10% down, but putting down 20% to 25% is better.

If you have a 760 credit score, plan to put down 25%, and are either 1099 or self-employed with solid deposits, we can look into a 1099 loan or a bank statement loan to assist you with your financing.

There are more options in the QM sector. So, If you’re self-employed, let’s explore your options. Let’s figure out whether a bank statement loan or a 1099 loan is the right fit for you. Reach out to me at (801) 687-2018 or kyle@kylemylender.com. I can help evaluate your specific needs and get you prequalified today.