As part of the SME Spotlight Series for MFC: We are pleased to present Shay Novak and Lendevity:
Shay Novak
President
Shay Novak began his journey in the mortgage industry right out of college. He started out as an assistant to two loan officers, quickly learned the ins and outs of the industry, and got promoted to his own branch. After the market crash, Shay took some time away from mortgages, but he returned a few years later and started working for a company whose values he aligned with. He then obtained his license, and began his job as a loan officer, with dreams of one day starting his own company. Two years later he made those dreams into a reality, and opened up Lendevity—a broker and direct lender company initially based out of his very own garage, which he converted into an office. In their second year, the company was ranked as the 1% originators in the nation.
Lendevity is a wholesale mortgage broker partnered with over 50 highly rated lenders in the nation. Working with a wholesale mortgage broker offers more options compared to the cookie-cutter solutions provided by traditional banks. We have access to a wide range of lenders and loan products, which allows us to tailor solutions to fit the unique needs of each client. This flexibility ensures that we can find the most cost-effective and suitable mortgage options, even in complex situations. Plus, we are able to shop for lower rates on the wholesale lending side, ensuring the best possible deal for our clients.
___________________________________________________________________
Ever since the 2008 financial crisis, lending has become a jungle for many individuals. This is especially true for many 1099 physicians. Your ability to secure a loan can seem daunting due to the unique challenges posed by alternative income documentation. Unlike W2 employees, independent contractors often rely on bank statements, a single year of 1099 forms, or other creative financial snapshots to prove income stability. This guide is designed to help you understand the available loan programs, how to best prepare your documentation, and even learn from the experiences of other physicians who have successfully navigated these waters.
Understanding the 1099 Physician Landscape
As a 1099 physician, your income is typically documented through forms that differ from the standard W2. This means that traditional loan approval processes may not always capture the full picture of your financial health. Lenders have recognized these challenges and now offer specialized programs that allow for alternative forms of income verification. Whether you’re a newly independent contractor or a seasoned professional, understanding these nuances is essential.
Key Points:
Loan Options Tailored for 1099 Physicians
What It Is:
Bank statement programs allow lenders to assess your cash flow based on deposits in your bank account over a defined period—typically a year. This approach can be especially beneficial if your tax returns do not fully reflect the steady income you receive.
How It Works:
Real-World Example:
Dr. Michael, a 1099 cardiologist, found that while his tax returns showed some fluctuations, his bank statements told a different story. With a consistent inflow of deposits from his consulting work and part-time practice, Michael was able to demonstrate a strong cash flow profile. This allowed him to secure a loan for refinancing his office space, despite having a less-than-traditional income record.
What It Is:
DSCR loans shift the focus from your personal income to the income generated by an investment property. These loans are ideal if you’re looking to invest in income-producing properties rather than purchasing a primary residence.
How It Works:
Real-World Example:
Dr. Samantha, an ambitious 1099 physician, decided to invest in a small apartment building. Despite a complex personal financial profile, she was able to secure a DSCR loan by demonstrating that the property’s rental income would cover the mortgage payments. This approach allowed her to build her investment portfolio without being solely judged on her individual earnings.
What It Is:
Conventional loans have long been the standard for homebuyers, but recent innovations now allow physicians to qualify with down payments as low as 3-5%. These loans typically require at least two years in business and use tax returns to confirm income stability.
How It Works:
Real-World Example:
Dr. Andrew, a 1099 pediatrician with a solid two-year track record, opted for a conventional loan when purchasing his first home. By providing consistent tax returns and a modest down payment, he secured a competitive interest rate, leaving him extra funds to invest back into his growing practice.
What It Is:
If you are transitioning from a residency or have just started a new position as a W2 employee, some lenders will accept an employment offer letter or your first pay stubs in lieu of a lengthy employment history.
How It Works:
Real-World Example:
Dr. Emily, fresh out of residency, landed a full-time position and needed to purchase a modest home to begin her practice. With just an employment offer letter and her first few pay stubs, she secured a loan that allowed her to start building equity while she continued her medical career.
What It Is:
For those with just one year of 1099 income, some lenders offer a program that allows you to qualify using that single year’s documentation. Up to 90% of your documented 1099 income can be used to meet the qualifying income requirement.
How It Works:
Real-World Example:
Dr. Rajiv, a newly independent physician, needed funding to open a small office for his private practice. Despite having only one year of 1099 forms, his lender allowed up to 90% of that income to be considered. This flexibility enabled him to secure a loan promptly, jumpstarting his practice without the traditional delays of waiting for multiple years of income documentation.
Additional Insights and Preparation Tips
Beyond understanding the various loan products, preparation is key. Here are some strategies and tips to help you get ready for the loan application process:
Documenting Your Income Effectively
Understanding Lender Requirements
Strategies for Investment
A Real-Life Scenario: Turning Challenges into Opportunities
Imagine Dr. Maria Alvarez, a 1099 physician who faced the common challenge of having a limited income history. After only one year of practice, she needed to secure financing—not just for a primary residence, but also to invest in a property that could generate additional income. Maria began by exploring the one-year 1099 income option. With her lender allowing up to 90% of her documented income to count, she quickly qualified for a loan. Encouraged by this success, Maria then decided to use a DSCR loan to purchase a small duplex. The rental income from the additional unit provided extra cash flow, which helped further stabilize her financial picture and pave the way for future investments.
Maria’s story highlights the importance of flexibility and forward-thinking. By understanding the various loan programs available, she was able to overcome the initial hurdle of limited documentation and build a foundation for long-term financial success.
Final Thoughts
Securing a loan as a 1099 physician does not have to be an insurmountable challenge. With a clear understanding of the available options—from bank statement programs and DSCR loans to conventional loans with minimal down payments and innovative one-year 1099 income qualification methods—you can find a financing solution that fits your unique circumstances.
Key takeaways include:
Whether you’re a newly onboarded W2 physician or an experienced 1099 contractor, there’s a loan program designed to meet your needs. By leveraging the right program and following best practices for documentation, you can transform challenges into opportunities and confidently take the next step in your financial journey.
