Construction Loans for Self-Employed & Non-Traditional Income

If: Borrower is a W-2 tech worker with RSU income representing >25% of total comp and has 12+ months vesting history from a publicly traded company

Then: Use conventional or jumbo lender experienced with RSU income (JVM Lending, Bridgepoint Funding, LendFriend). Fannie Mae allows 12-month minimum history for time-based RSUs. Jumbo portfolio lenders often have MORE flexibility than agency programs. Calculate qualifying income using 200-day moving average method. Ensure vesting continues for 3+ years from note date.

If: Borrower is self-employed with high tax write-offs creating a gap between actual cash flow and reported net income on tax returns

Then: Use a bank statement loan program (12 or 24 months). Business statements at 50% expense factor or lower with CPA letter. For construction specifically, explore GO Mortgage Non-QM Single Close, California Construction Loans Low Doc program, or Doorway Home Loans. Expect 0.5-2% rate premium over conventional. Minimum 680 credit and 20-25% down for construction.

If: Borrower has K-1 income from PE funds with variable/irregular distributions

Then: Do NOT rely on K-1 income as primary qualifying income for construction loans. Capital gains from fund exits are not considered stable recurring income. Instead, qualify primarily on other income sources (W-2, base salary) and use non-QM asset depletion as alternative (total liquid assets ÷ 60-72 months = qualifying monthly income). Example: $4M in liquid assets = ~$55,000-$66,000/month qualifying income.

If: Borrower's DTI exceeds 43% when including projected construction loan permanent payment

Then: Conventional construction loan will likely be denied. Options: (1) reduce loan amount, (2) use non-QM lender with higher DTI tolerance, (3) add co-borrower, (4) pay off other debts to reduce DTI, (5) if currently renting/paying mortgage on property to be sold, request lender exclude current housing cost from DTI.

If: Borrower is a 1099 contractor with only 1 year of history seeking construction financing

Then: Conventional route is unlikely unless borrower has prior experience in same field at similar income level (Fannie Mae exception). Best options: (1) Newfi Lending W-2-to-1099 program if same industry, (2) NASB dedicated 1099 program (12 months 1099-NEC + YTD), (3) bank statement program with 12-24 months of deposits. For construction, Farm Bureau Bank and Capital Home Mortgage list both 1099 loans and construction loans.

If: Bay Area construction project total cost exceeds $1,249,125 (2026 conforming limit)

Then: Loan is in jumbo territory requiring portfolio or non-QM financing. This is the norm for Bay Area construction. Jumbo portfolio lenders often have MORE flexibility with RSU/non-traditional income than conforming programs. Seek Bay Area-based brokers (JVM, Bridgepoint, A Good Lender) who have relationships with jumbo construction lenders familiar with tech compensation.

If: Borrower has >$1M in vested, publicly traded stock but relatively low base salary

Then: Consider asset depletion / asset qualifier programs. Divide total liquid assets (including vested stock in brokerage accounts) by 60-72 months to generate qualifying monthly income. Example: $3M vested stock ÷ 60 months = $50,000/month. Available from Griffin Funding, Angel Oak, Deephaven, A&D Mortgage, Defy Mortgage. Requires 700+ credit, 20-30% down, $500K+ liquid assets. Unvested RSUs do NOT count.

If: Borrower is choosing between one-time close and two-time close construction loan

Then: Strongly recommend one-time close (construction-to-permanent) for tech workers with non-traditional income. One-time close eliminates requalification risk — if stock price declines or income changes during 12-18 month construction period, permanent financing remains intact. Two-time close requires re-qualifying at completion; any job loss, credit change, or income decline could prevent approval. One-time close has slightly higher rate (est. 0.25-0.50% premium) but only one set of closing costs.

If: Borrower received bonus income for only 1 year (not 2)

Then: Fannie Mae may accept 12-month minimum bonus history with positive offsetting factors (strong credit score, significant reserves, employer confirmation of ongoing bonus program, low DTI). Freddie Mac is stricter — generally requires 2-year history with written analysis. FHA is most flexible — 1-year minimum in same or similar line of work. For construction loans, jumbo portfolio lenders may accept 12-month history with strong compensating factors.

If: Self-employed borrower shows >20% year-over-year decline in business income

Then: Expect heightened underwriting scrutiny. Industry practice triggers manual underwriting at >20% decline (though Fannie Mae has no official threshold). Lender will use lower of two years (not average) for qualifying income. Must provide written letter of explanation. If income is still declining in current YTD period, lender may disallow income entirely. Must demonstrate stabilization with recent P&L, bank statements, or paystubs. For construction: lender needs high confidence income continues through 12-18 month build.