- A 1099 mortgage lets contractors qualify using the income shown on their 1099 forms, not the net income on their tax return.
- Many lenders look at one or two years of 1099s and apply an expense factor that varies by lender.
- About two years in the same line of work is typical, though some lenders consider less.
- Non-QM 1099 programs are not available in all states, and pricing depends on the full file.
If you get paid on a 1099, you already know the frustration. You earn good money, you write off legitimate business expenses with your CPA, and then a lender looks at your tax return and sees a much smaller number. A 1099 mortgage is built for exactly that situation. It lets you qualify using the income reported on your 1099 forms rather than the adjusted figure on your Schedule C.
You didn't do anything wrong. Smart tax planning shouldn't cost you the house. This guide walks through how a 1099 mortgage works, who it fits, what lenders typically review, and how to prepare.
What is a 1099 mortgage?
A 1099 mortgage is a home loan, usually in the non-QM category, that uses your 1099 earnings as the main source of qualifying income. Instead of averaging two years of net profit from your tax returns, the lender starts with what your clients actually paid you.
Traditional loan programs generally qualify self-employed borrowers on taxable income after expenses. For a contractor with significant write-offs, that number can be far lower than what they really bring home.
You can read more about the program itself on our 1099 loans page.
Who a 1099 loan is built for
The 1099 mortgage tends to fit people who are paid as independent contractors and whose tax returns understate their earning power. Common examples include:
- Real estate agents and brokers paid on commission
- Consultants, coaches, and freelancers
- Insurance agents and financial professionals paid on a 1099
- Medical and dental professionals working as contractors
- Truck drivers, tradespeople, and gig workers with steady 1099 history
If most of your income comes through 1099s from one or more payers, this program is worth a look. If your income runs mostly through a business bank account with many smaller deposits, a bank statement loan may be the better fit. We can compare both.
How lenders calculate income on a 1099 mortgage
Every lender has its own method, but the general shape is similar. The lender adds up your 1099 income, applies an expense factor, and divides by the number of months reviewed to get a monthly qualifying figure.
The expense factor
Because 1099 income is gross, many lenders reduce it by a set expense factor to account for the cost of doing business. The percentage varies by lender and program. Some use a modest factor, while others may adjust based on your line of work or supporting documents. This is one of the biggest reasons comparing lenders matters.
One year or two years
Some programs look at the most recent year of 1099s. Others average two years. If your income grew, a one year review may show a higher number. If last year dipped, a two year average may smooth it out. Lenders typically also want to see that your current year is on track, often through year to date statements or payer documentation.
Illustration
Illustration only, using round numbers: say you received 1099s totaling $120,000 last year. If a lender applied an assumed expense factor of 10%, the qualifying annual income would be $108,000, or $9,000 per month. The same borrower's tax return might show far less after deductions. Real figures depend entirely on the lender and your file.
Want to see what you qualify for?Answer a few questions. No tax returns, no credit pull to start.
See if you qualify1099 mortgage requirements to expect
Requirements vary by lender, but most 1099 programs review a familiar set of factors. Here is a general picture of what lenders look at.
| Factor | What lenders typically look for |
|---|---|
| Income history | About two years of 1099 income is typical; some lenders consider less |
| Credit | Many programs start around 620, with better terms at higher scores |
| Debt to income ratio | Some lenders allow up to around 50% with compensating factors |
| Down payment | Down payment requirements vary by lender and program |
| Reserves | Many lenders want a cushion of funds left after closing |
| Property type | Primary homes, second homes, and some investment properties, depending on the program |
Consistency matters
Lenders like to see stable income from the same field. Switching payers is usually fine if you stayed in the same line of work. A change in industry, a long gap, or a sharp drop in earnings will usually get extra questions, so it helps to be ready to explain.
What documents you will need
A 1099 mortgage generally asks for less paperwork than a full doc loan, but it is not paperwork free. Expect a list along these lines:
- Your 1099 forms for the year or years being reviewed
- Year to date proof of income, such as payer statements or recent bank deposits
- Government issued ID
- Recent asset statements for down payment and reserves
- Authorization to pull credit
- Some lenders ask for a written verification from your payer or a recent transcript
If your situation includes a mix of W-2 and 1099 income, tell us up front. Some lenders can combine income types and some cannot.
1099 loan vs conventional vs bank statement loan
A conventional loan may work if your tax returns already show strong net income. A 1099 mortgage often works well when your 1099 totals are strong but your deductions are large. A bank statement loan can fit when your deposits tell a fuller story, especially if you have several income streams. If you own rental property, a DSCR loan qualifies on the property's cash flow instead of your personal income.
The honest answer is that many contractors qualify under more than one option. That is where an independent broker earns its keep: Matador works with 150+ wholesale lenders, so we can run your numbers through several approaches and compare real offers.
Common mistakes contractors make
A few avoidable missteps come up again and again with 1099 borrowers.
Waiting until you find a house
Talking to a lender early gives you time to gather documents and understand your numbers.
Moving money around right before applying
Large, unexplained transfers or new debts can complicate a file. If you need to move funds, keep a clear paper trail and let us know.
Changing your tax strategy on your own
Some people think they need to stop taking deductions to qualify. That decision belongs with your CPA. A 1099 mortgage exists so you do not have to choose between good tax planning and a home. We are not tax advisors, so keep working with your CPA on that side.
How to get started
Start with a simple conversation about your income, credit, and goals, and we can tell you which programs look like a fit. You can see the full process on our how it works page.
Pricing depends on the file, so we will not quote you a number before we understand your situation. What we will do is compare real offers across lenders and explain the tradeoffs in plain English.
Frequently asked questions
Can I get a mortgage with only 1099 income?
Yes, many lenders offer 1099 mortgage programs that use your 1099 earnings as qualifying income. These are typically non-QM loans, so terms and availability vary by lender and state. Requirements like credit, reserves, and income history still apply.
How many years of 1099s do I need for a mortgage?
About two years of 1099 history is typical. Some lenders will review a single year, and some consider less history if you stayed in the same field. The right option depends on how your income has trended.
Do lenders use gross or net income on a 1099 loan?
Most 1099 programs start with gross 1099 income and then apply an expense factor. The size of that factor varies by lender and program. That is different from a conventional loan, which generally uses net income from your tax return.
Is a 1099 mortgage the same as a bank statement loan?
No. A 1099 mortgage qualifies you based on your 1099 forms, while a bank statement loan uses deposits shown on 12 to 24 months of bank statements. Some borrowers qualify for both, and the better choice depends on which documents show your income more fully.
This article is general education, not tax, legal, or financial advice, and not a commitment to lend. Loan programs, guidelines, and availability vary by lender and state and change without notice. Non-QM loans are subject to credit approval, income and asset verification, and appraisal. Talk with your CPA about tax questions. Small Business Mortgages is a marketing brand of Matador Lending, NMLS #2072896. Equal Housing Opportunity.