I’m feeling stuck and frustrated trying to get a loan approval as a 1099 employee. My husband and I have been working with several local lenders for the past two years, but they keep saying our income is too inconsistent to qualify. Here’s the scoop: we both work 1099 for Company A during the summer months (from May to October) when we only make the commission, so our monthly income varies quite a bit. From October to April, my husband does W2 contract work for Company B, but it’s typically around 4-5 different contracts. Our average earnings look like this: I make about $30,000 yearly, with monthly earnings during the summer fluctuating between $1,000 and $4,000, and during the winter months, I earn around $600. My husband makes about $35,000 overall, with his summer months bringing in $2,000 to $5,000, but he doesn’t earn anything from November to April. Then, for his W2 work from October to April, he makes around $70,000. Our credit scores are decent, mine is 737 and his is 720. The only debt we have is my student loans, totaling $76,000, with a $600 monthly payment, and I’ve always paid on time. We’ve never owned a home before and don’t have any bankruptcy history. Our consistent annual income is around $102,000, which we can prove with paystubs, W2s, and tax returns. I’m just at my wit’s end because loan officers keep saying our income is too inconsistent. I get that our monthly earnings vary, but we have jobs year-round and earn a reasonable amount. Do people like us, who work as contractors or 1099 employees, just not get to own homes? It feels so unfair. Any advice on what to do next would be super appreciated.
Have you thought about going to a mortgage broker? They might be better equipped to handle your situation. I’ve heard they can be more flexible than traditional lenders.
Totally agree. It’s worth checking out! Brokers often have a wider range of options and might understand your income better.
Just curious, when lenders say your income is inconsistent, do they mean your gross amounts or net amounts after deductions from your Schedule C? Also, what’s the estimated monthly payment for the house you’re looking at?
@Mackenzie
Good question! The amounts I mentioned are gross before taxes. We’re looking at a house priced at around $210k and planning to put down $40k, but we could manage up to $80k if that helps us get accepted.
PITIA is a term for total monthly payments, including mortgage, taxes, insurance, and any HOA fees. It’s good to have that number in mind. What’s your estimated total payment for the house?
Chance said:
PITIA is a term for total monthly payments, including mortgage, taxes, insurance, and any HOA fees. It’s good to have that number in mind. What’s your estimated total payment for the house?
Oh, I didn’t know that! The estimated monthly payment for the house is about $1,300, which includes taxes and insurance. We’re currently renting for $2k a month, so we’re comfortable with that.
It sounds like your Schedule C deductions might be lower than you think. Those deductions can affect how much income lenders see when they assess your application. Have you thought about claiming fewer deductions next year?
@Van
I’m not sure how to approach that. It seems complicated. Any tips on how to do it without getting in trouble with taxes?
Leith said:
@Van
I’m not sure how to approach that. It seems complicated. Any tips on how to do it without getting in trouble with taxes?
It can be tricky, for sure. Basically, you’d want to limit business expenses on your next tax return. But definitely consult a tax professional to ensure you’re doing it right.
You might want to consider lenders that do manual underwriting. I’ve heard that some companies like Churchill can help with that type of loan. It seems like they understand the needs of 1099 employees better.
I’ve gone through this too, and I can tell you that it can be tough. But I managed to get approved with 100% 1099 income. It’s about finding the right lender. Keep pushing; you’ll find someone who gets it.
Just a heads up, if you’ve already been denied by multiple lenders, it might be a good idea to check your DTI (Debt-to-Income) ratio. That could be a sticking point for them.
Vesper said:
Just a heads up, if you’ve already been denied by multiple lenders, it might be a good idea to check your DTI (Debt-to-Income) ratio. That could be a sticking point for them.
Thanks for the tip! I hadn’t thought about that. What’s a good DTI ratio to aim for when applying?
@Leith
Generally, you want to keep it below 43%, but the lower, the better. It helps lenders feel more secure about your ability to pay.