Self-employed borrowers face unique challenges when it comes to getting approved for a home loan—especially if they're looking to secure financing for a significant amount.
With so many lenders and different variations of jumbo loans available, it's difficult to know which ones will work best for your personal needs. Worry not!
In this blog post, we'll give you an inside look at all of the top jumbo loan options available in today's market and cover the most common requirements you'll need for each one.
Luckily for you, there are plenty of options available that should fit your unique needs, so let's dive in.
1099 Only Mortgage Loan
If your income structure makes it impossible for you to provide proof of income via tax documents or other traditional forms of documentation, a 1099-only loan can be an ideal solution for you.
This type of loan is designed specifically for self-employed individuals or independent contractors who receive 1099s rather than W-2s. Lenders will assess income based on 1099s rather than tax returns for this loan.
Property owners and investors may apply for 1099 loans for up to $3 million to purchase, refinance, or invest in properties.
Many lenders specialize in providing this financing option for self-employed borrowers, including traditional lenders that have special programs or underwriting guidelines.
Requirements
The requirements for a 1099-only loan will vary depending on the lender and the loan product. Generally speaking, most lenders will require borrowers to meet the following criteria:
- Proof of Income: 6 months - 2 years worth of 1099s
- Credit Score: minimum score of 620 is required to qualify
- Debt-to-Income Ratio (DTI): 50% or lower
- Down Payment: 10% down
- Private Mortgage Insurance: Depends on the lender, but it's not typically required
Jumbo Construction Loan
For self-employed individuals who want to construct a new home or renovate existing properties, a jumbo construction loan is the perfect mortgage option.
These loans offer borrowers flexibility when it comes to funding their projects, as they typically allow for a variety of payment and loan term options.
Borrowers can pay the loan in full once construction is completed or roll their loan into a traditional mortgage.
To obtain a jumbo construction loan, lenders will usually require a detailed construction plan and budget, as well as a down payment and collateral.
Requirements
Most lenders will have similar requirements for qualification, such as:
- Proof of Income: Two years' worth of tax returns, W2, or bank statements
- Credit Score: Minimum score of 620 is required to qualify
- Debt-to-Income Ratio (DTI): 50% or lower
- Down Payment: Varies depending on the lender, but usually, it's 20% down
- Construction Plan: Must provide a detailed construction plan, budget, and contractor during application
- Private Mortgage Insurance: Depends on the lender and how much money is put down
Bank Statement Loan
A bank statement loan may be a good option for self-employed borrowers who have difficulty documenting their income on a traditional basis, especially if they receive a large amount of cash or have fluctuating or inconsistent income streams.
Bank statement loans let self-employed people borrow a home loan based on their bank statements instead of traditional income documentation like tax returns.
Here's how it works: borrowers typically need to provide their personal or business bank statements for a specific period of time, usually the past 12 to 24 months.
The lender then assesses your cash flow and how consistently you have generated income. This helps them decide whether or not you qualify for a loan and determine how much they're willing to lend you.
Requirements
While there will be different requirements for bank statement loans, the most common requirements include:
- Proof of Income: 12-24 months' worth of bank statements
- Credit Score: A minimum score of 620 is required by most lenders
- Debt-to-Income Ratio (DTI): 50% or lower
- Down Payment: The down payment typically ranges from 10% to 20%
- Profit and Loss Statements: Many lenders will require borrowers to prepare a profit and loss statement
- Private Mortgage Insurance: Most lenders require this if the down payment is less than 20%
Asset-Depletion Loan
Self-employed individuals or retirees with substantial assets available but not a high enough income may benefit from an asset-depletion loan.
An asset-depletion loan is a type of non-QM mortgage loan that allows borrowers to leverage their assets as collateral to secure financing, offering them an alternative to traditional mortgages.
These assets can include:
- Stocks
- Savings accounts
- Investment portfolios
- Retirement accounts
Lenders simply look at a borrower's assets and use this to calculate the loan amount. That figure is then divided by a set number of years, resulting in a base figure for a mortgage payment.
Requirements
Asset depletion guidelines are different for every lender. However, the most common things borrower will need to bring to the table include:
- Proof of Income: Borrowers will use their assets to qualify (the value of their assets must be twice the amount they wish to borrow)
- Credit Score: Lenders generally require a score of 680
- Debt-to-Income Ratio (DTI): 50% or lower
- Down Payment: A minimum of 20% is typically required
- Private Mortgage Insurance: Check with your lender, but most don't require it
Note: If the borrower plans on using retirement funds, they must be within two years of retirement age.
Investor Cash Flow / DSCR Loan
These loans are best suited for real estate investors seeking to purchase and rehab properties faster, improve cash flow, expand their portfolios, or acquire new properties.
Although some lenders consider these loans to be separate products, both of these loans are designed to allow borrowers to obtain a mortgage based on both property cash flow and an individual's financial circumstances.
The loan works by allowing the borrower to access the equity in their existing rental properties or portfolios of similar investments without having to use their personal income or tax returns to qualify for the mortgage.
These loans can be used for various purposes, including purchasing new rental properties, refinancing existing ones, consolidating debt, or even buying a home.
Requirements
In order to be eligible for these loans, borrowers must have a property in mind and meet certain credit requirements, such as:
- Proof of Income: The property will serve as an income source
- Credit Score: Most lenders require at least a 680 score
- Debt-to-Income Ratio (DTI): 50% or lower
- Down Payment: 20% is usually required
- Private Mortgage Insurance: Your lender may require it, but most don't
- DSCR Score: Must be no higher than 1
Modern Day Lending Has Jumbo Loan Options For All Your Needs
At Modern Day Lending, we understand that taking out a loan can be stressful, especially for self-employed borrowers. That's why we do everything in our power to make the process easy and hassle-free.
Our experienced professionals prioritize customer service and satisfaction, making sure to provide you with exceptional jumbo loan options that are tailored to your needs.
We understand that jumbo loans require a unique approach due to the large amounts of money involved. That's why we take the time to listen to your financial goals, analyze your credit profile and recommend the best loan product for you.
Here's what you'll need to get started with our jumbo loan process:
- Proof of Income: This will vary depending on the product, but we typically need tax returns, W2s, bank statements, or 1099s.
- Credit Score: We require a minimum of 620 to qualify for most of our jumbo loan products.
- Debt-to-Income Ratio (DTI): We use a standard 50% DTI for most of our loan qualifications.
- Down Payment: We offer a wide range of low down payment options.
Don't settle for anything less than the best when it comes to your loan needs—choose Modern Day Lending for all of your jumbo loan requirements.
Contact us to learn more about our competitive rates and flexible terms!
