good morning

good afternoon

good evening

wherever you are and whenever you're listening

I wanna congratulate you

on taking step towards bettering yourself

learning how to be a better professional in

the real state world

today we are joined by Chris Brazell

Director of operations for the Sherry Riano Team

what's going on

good afternoon

good morning

good evening

hope you're doing well

and my name is Hunter Boyd

I'm the director of sales for the Sherry Riano Team

this is mortgage mindset

today we're gonna continue on our non qm series

we're gonna be talking about two additional

non qm programs

the 1099 loan program

and the profit and loss or the PNL

loan program

and let's dive right in so Chris

why don't we just go over a general

review of what is a 1099 loan just yeah

so let me let me start by saying

so let's just get down to the basics here

1099 just so y'all know

different than a W2

how is it different than a W2

1099 is just total gross receipts of income

so there's nothing deductive

um that that's what makes

the major difference between somebody that's

self employed and somebody that's a W2 employee

so W2 takes out your taxes

things like that and tells you

what you've made based on your net revenue

your net income

yep 1099 is just total gross

and so with that you know

anybody that's 1099 is deemed in the mortgage industry

self employed

hmm all right

so what would you get

a 1099 from

whoever's paying you for the work you've done

and then you have to file a

Schedule C on your tax returns

and that Schedule C is where

you start taking the deductions of depreciation

maybe expenses here

expenses there

things like that

and then you pay your taxes on your net revenue on this

on the Schedule C

so 1099 employee is exactly that

somebody that is employed

by an employer or is paid as a contract worker uh

but they are responsible for their own taxes

and deductions on their tax returns okay

and high level view of a PNL or profit and loss

yeah so PNL

um what that is

it's literally like uh

quick books

you know it is the best way to think about it

it's you take your

your grocery seats

and you literally

start taking the deductions and say okay

I'm deducting this expense

that expense

maybe you pay employees to work for you you know

so that's gonna come off your deductions

and so a P N

L is a way you keep track of your business income

and expenses

and that's typically what

a self employed borrowers gonna give to their CPA

at the end of the year

file their taxes

so the PNL is just tracking

month a month

all your income

all your revenue

and all your expenses

okay alright

so let's get the boring stuff out of the way real quick

this is a non qm loan

this stuff changes literally overnight

sometimes before you place an offer with a non qm loan

if you know

your client is using one of these products

we encourage you to reach out to your lender

whether it's the Share

Rihanna team

or whoever you're working with

confirm that one

that loan program is still available

the structure that lender had this loan program under

is of still available as well

because even the structure

whether down payment

credit scores

things like that

all that can change

literally overnight

this is stuff that they house

they monitor

they will take all the way to pay off

whether that might be foreclosure

or paying off the loan

so they kind of make up their own rules

similar to like a local credit union

all right let's dive into 1099 a little bit more though

um so one cool thing

I think a lot

about this program that a lot of people may not know is

no tax returns are required

don't need to see him

a lot of people

that's their number one question

is a self employed borrowers hey look

I write off a lot of my income

as you should

you should take advantage of the tax

laws that are available to you

um but you know

that does provide a little bit of hesitancy for our

self employed bar bar

so allowing someone upfront to know

hey look we don't

need to see any tax terms

I think that is a huge relief

off of a lot of self employed bars minds

yeah correct

and also it

allows you to kind of

the best of both worlds

and what I mean by that

is your CPA

or tax prepares

job is to work for you

on your behalf

and take advantage of those tax

laws that are out there

that you can take expenses

and in turn it

it lessens your tax burden

that you're gonna pay the

IRS at the end of the year for your

your tax Bill

so you get to do that

take advantage of those rules that are out there

lessen your tax burden

and then since we don't need to see these

it helps you get into a house

so you don't have to pay

his high taxes

because typically

if you're gonna go a

conventional route

we have to see

two years of

tax returns

if you're self

employed yeah

and so typically

you got to back up 2 years

and start telling

your CPA or

tax prepare hey

I'm thinking of buying a house soon

which is basically code

for saying hey

I can't write

off as much of my rent as my income

cause the your CPA

or tax prepare

is gonna know that

we need to see

the bottom line number

these programs are there

if you wanna buy right now

you've already written off

all your expenses

can't go back

and redo your taxes

and you don't wanna

redo your taxes

cause you're gonna have to you know

foot that Bill

of paying your tax

burden to the IRS

when you redo

your taxes and

and that allows us

you know to

get you in based on

your gross receipts

so the cool thing about

the 1099 is

we can go to a three million dollar loan on these

which is great

that's incredible

that's covers pretty much

anything in

the Raleigh area yeah

it's a great loan

so we're gonna look at your

two years of 1099

you do have to be

two years of self employed

and the key with this is

a lot of times we uh

anybody that's self employed

we can take two years

as long as you're self employed

it doesn't matter who

you work for

a 1099 wants to

see some stability

a 1099 program

excuse me and so you

we are gonna wanna see that

you're self

employed with a single

employer for those

two years okay

so that is the

key with this and so

um you know

it's gonna help realtors

you know realtors

if they work for

Keller Williams

work for Coldwell Bank

or IE you know

any of those real state groups

that's it self employed

a 1099 employer

but you're working

for the same

employer for

two years then this

this opens up this

program to you

that's awesome

yeah that is

a unique thing about

the single employer thing I think

um a lot of

people kind of

assume you know

certain different things

so having that as a

little bit additional overlay

um I do love that

this is an owner occupied

second home

investment property loan as well

uh a lot of these things

like the DSR

that's only

available for

investment properties

you know so

it opens up

things there

and also allows for a cash

out refinance

so that you know

if maybe hey look

appreciation

is happening

in an astronomical

way in the area

my homes appreciated

50% in the last

couple years

let me tap into that

appreciation and

really kind of

use that to my advantage

maybe I need to purchase another property

maybe I need to

you know get into

the investment space

um so that's

really good

one of the things that

seems to be consistent with a lot of these non

qm loan programs

which I think is

just mind blowing

right now is

the 40 year

interest only

option where for

this amateurization is

not over 30 years

like a traditional

it spread out over 40

and it is only interest

so you are taking

advantage of the

appreciation

by owning the home

however you're

not paying down that principal

loan balance

you're making your

interest only payments each month

that's gonna be a significantly reduced

monthly payment

yeah it's great

cause it helps

you qualify

for more of a home

cause since it's a 40 year

interest only

we say I owe in

the business

but since it's a

40 year I owe loan

you qualify on

the interest

only payments

and therefore

can get you into a

bigger house

if that's what

you're looking to accomplish

you know in this

again we're

getting more income from

your your 10

ninety nines

we're getting a lot more

being able to qualify

you for a higher house with

the interest

only payments

and things like that

so here's also the thing

six 40 minimum

credit score 6 4

yeah that's

back in the day

when they used to have these portfolio loans rolled out

it used to be you couldn't touch any of these programs

unless it was 700

and that's right

and now I mean

this program goes down is low 6:40

also minimum 10% down

so you're not looking at having to put 25

30% down 10% down

minimum up to 90% loan to value

that's great

that's really relaxed in the last couple years

I mean even like I would say six months ago

we were seeing minimum of 20

and 25% down for some of these programs

and so to see a drop already kind of opening up

especially in 2024

we're gonna

expect to see a lot more buyers in the market

I think they're just trying to capture that yeah

and one other thing too

I wanna touch on that

it is again

referring back to what you started the podcast with

you know double check with us as your lender

guidelines change a lot

yep but the season and requirements on on past

let's call them hiccups

you know bankruptcy

foreclosures

and things like that

on a lot of these nine qm programs

it's a lot less in conventional financing

so hey let's say you had a couple bad years in a row

you know things

things go south

that happens to everybody

oh and a lot of these

it's only two years seasoning from the

from the foreclosure

short sale bankruptcy

any of those major credit hiccups

I mean it's like half for some of our loan programs

exactly right

so you know

again if you're looking to buy now

and you're like

I can't I have to wait the four or five years

that's required by Fanny Man

Freddie Mac

talk to us yeah

this a get in with 1099 b

you don't have to wait the full four to five years

from the seasoning requirement past that credit hiccup

yep absolutely all right

let's switch gears

let's jump over to P

now real quick

do like a brief dive into it

um so one of the things about this program

it does the penile does need to be prepared by a CPA

or tax prepare is not something you wanna be able to

or you can do yourself

you need to have

some level of authority involved in the

in the profit and law

statement yeah

it's gonna that that's our

what we call business a third party

a third set one interested third party

what that means is

it's somebody that is just their job to drop the C

the P&L it's their job to you know

and I I don't like to say this

but it's you know

it's their job to tell the truth basically

that's right

they're uninterested in that fact as that

they're just doing their job

they're providing the numbers to us based on what

you provide them

and that way

that's how they're uninterested third parties

that they're giving us

non biased information

and so the PNLs drawn up by the CPA

tax prepare

give it to us

we send it to the investor

we get to qualify an income

and get it back to you

this also can go up to a 3 million dollar

loan amount

which as you said

covers most of the area um

now this one does require 20% down

so it's a little bit different than the 1099

you're gonna need that extra skin in the game

so that the 20% down is required on this

but also 6:00 40 credit minimum

which is great

that's wild yeah

it's it's a really good

program out there and again

we just look at it

on both the PNL and the 1099

we're gonna wanna see business bank statements as well

just it's kind of correlate the fact that

what you're giving us as far as a 1099

past 1099 and a PNL

is going into your bank account month to month

so we are gonna wanna

see these things to kind of double and triple check

but again we do not need tax returns

and pay stubs

things like that

that are not gonna be required for this loan program

I think it's important to remember

you know conventional financing

there are so many guidelines

overlays things like that

that you know

all kind of point to the same income W Two's

monthly pay stubs

things like that um

even your tax return to some situations will need

this is kind of

a different way of

referring that

when we have a 1099 yes

we can see the 1090 nines for last two years

but also you know

we're gonna see

you need to see

bank statements of this kind of as a secondary support

like hey look

this income is still coming in

is still consistent

um for females

I do like that we have a one year and a two year option

obviously the more verifications with any type of

non qm loan

the more verification

the longer the period of a review

the generally

the lower the interest rate will be

so you know

you're gonna see a little bit more of a um

closer to conventional interest rate than

you would on a two year

than you would on a one year

but it does give you that flexibility

of say you had one bad year

and you want only use the good year

no more most recent

better year where

you got into the business

and they added a lot of

you know write offs expenses

startup costs

so even your PNL shows up a pretty

you know let's just say

a lower bottom line

and so you do have that one year flexibility where if

you're really

ramped up and

and really doing

really good business here

number two in

the business

and that will help

you out a lot

that's it that's it

that's good

um both these programs

I think I don't know if we mentioned it earlier

but both these do require 150,000 dollar loan minimums

um that's not a US thing

that's an investor thing

it's kind of like

you know part of the

making up their

own rules there

um but once again with PNL

2 years of seasoning

for foreclosure

short sale bankruptcy

even the deed

and Lou stuff

um so once again

no not having to wait

the full four years there

there's options

out there for people

um with all different kinds of dynamics

and this is what these

both of these loan

programs are for

and other not

QM products

we've talked to

about in the past DSR

investment properties

bank statement loans

it's if you

ever have a client or a friend or

anybody that

you talk to say

I can't get a loan

because I know

I can't get a loan

because I'm self employed

that should ring a bell

right then and there

and say hey

you need to talk to

the share reality

and talk to hunter

and Chris they

I've heard them talk about these loan programs

because it relaxes

the rules that

Freddie Mac

put on self

employed borrowers

where we have to

use that Schedule C

net income to match up with what

you pay taxes on

this open set up

so if you ever hear from somebody saying

I'm self employed

I know I can't

get a mortgage

you know that

this is what these loan

programs are for

and for our lenders

this is also

the benefit of

being a broker

having different loan options

available to

having different

programs available

to not just

the standard you know

fanny Freddy

uh hedge loan

and then you know

ride up send it off

having these options are

wanna bring in more loans for you

each and every month

there's gonna be a different software

you're gonna have to learn for sure

there's gonna have to be

different rules

and underwriting

procedures timelines

turn turn times

and stuff like that

but it's going to help

you bring in more loans

for the real

estate agent out there

making sure that

you're knowledgeable

when you have that

conversation with someone

and you're just sitting down with them

they're telling you

they're telling you

you about themselves

hey I'm a self

employed borrower

honestly I write

off most of my stuff

I've kind of

had this issue in the past

where I went to a bank

and they said

they couldn't help me

this is these

are cues for

you to kind of hey look

I've got somebody for you

it may not work out

maybe it's a situation where

unfortunately

there's nothing we can do

but let's at least check

right I mean

we're supposed to be doing

our due diligence

for these people

putting our best foot forward

making sure we're

exploring every

avenue to help

our clients

everyone deserves a home

and we believe that here

the share round team

no matter how

big the house

no matter how small

no matter the situation

everyone deserves

a place to call home

well look the spin

mortgage mindset

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educational

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non QM we're

excited to share about

asset qualifier

coming up make sure

you listen to that

I think it's gonna help

a lot of you

see you next week

the Mortgage Mindset Podcast is hosted by

the Sherry Riano Team at Clear Mortgage

powered by City First Mortgage Services LLC

Sherry Rianos NMLS ID is 7 1 7 7 4

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