Self-employed individuals often have irregular income that may come from several sources, and they may not be able to qualify based on the income shown on their tax return.
We offer a variety of alternatives that can help self-employed borrower obtain financing for either their primary residence purchase or for real estate investing initiatives.
Bank Statements Loans
Bank statement loans have emerged as a viable alternative to traditional stated income loans for borrowers facing challenges in verifying their income through conventional means such as providing the last two years' tax returns, W-2s, and pay stubs. Classified as non-QM loans, nontraditional loans, or expanded criteria loans, these financial instruments accept alternative forms of documentation to demonstrate the borrower's capacity to repay. Essentially, a bank statement loan enables borrowers to validate their income using bank statements, offering flexibility and an alternative avenue for those with unconventional income verification needs.
Profit and Loss Loans
These loans usually use a CPA, EA prepared Profit and Loss statement rather then 2 years tax returns that is common for conventional financing.
It can be a great option to self-employed borrower when the net income per books is higher than what is reflected on taxes manly due to time differences.
1099 Loans
A 1099 income loan is for self-employed or independent contract workers who have difficulty qualifying for a conventional mortgage loan. Lenders look at income from a 1099 instead of tax returns.
This can pe a great option for independent contractors who are Schedule C sole proprietors.
Asset Depletion loans
An asset depletion mortgage, also recognized as an asset-based home loan, is a unique mortgage arrangement enabling qualification based on your assets as a source of income. Unlike other asset-based lending approaches, this type of mortgage doesn't use your assets as collateral; instead, lenders convert your assets into income to assess your repayment capacity.
Notably, an asset depletion mortgage eliminates the need for proof of employment income, a requirement that may pose challenges for certain borrowers. This is particularly beneficial for individuals such as the self-employed who lack conventional proof like pay stubs or W-2s, and whose tax returns might not accurately portray their financial standing. If you find yourself ineligible for a standard home loan, an asset depletion mortgage could be a suitable alternative for your specific financial situation.
These are the most common but there are a multitude if other loan options designed to help the self-employed borrowers qualify based on alternative types of documentation.