A 1099 mortgage loan is a type of non-qualified mortgage (non-QM) designed for people who are paid as independent contractors rather than employees. Because business write-offs can make taxable income look much lower than actual earnings, this program qualifies you using your gross 1099 income, minus a standard expense factor, instead of the net income shown on your tax returns.

Here are the Key Features of 1099 Mortgage Loans

• Income Verification through 1099 Forms: Qualify using 12 to 24 months of Form 1099 income, along with proof of year-to-date earnings (such as recent check stubs, bank statements or payment records) and IRS wage and income transcripts. Full tax returns and Schedule C are generally not required.


• How Qualifying Income Is Calculated: A standard expense factor, typically 10% to 15%, is subtracted from your gross 1099 earnings, so roughly 85% to 90% of your receipts may count as qualifying income. A letter from a CPA or enrolled agent may be used to document a different expense ratio. If your 1099 income is paid to an LLC, a CPA letter confirming 100% ownership is usually required.


• Target Audience: Freelancers, gig workers (such as rideshare and delivery drivers), independent consultants, real estate agents and other commission-based professionals paid on a 1099.


• Work History: Generally requires at least 2 years in the same line of work, with at least 1 year of 1099 income. If you moved from W-2 to 1099 pay with the same company, that combined time may count toward the 2-year requirement.


• Down Payment: Typically 10% to 20% or more (loan-to-value up to 80%-90%), depending on credit score, loan amount and how the property will be used.


• Credit Score Requirements: Minimum credit scores generally start between 620 and 660. Higher scores, typically 700 and above, may unlock more favorable pricing and lower down payment options.


• Debt-to-Income Ratio (DTI): Many programs allow a DTI of up to 50%, and higher ratios may be considered with strong compensating factors such as cash reserves.


• Cash Reserves: Typically 3 to 12 months of mortgage payments (principal, interest, taxes, insurance and any association dues) in liquid funds after closing.


• Property Types: Primary residences, second homes and investment properties may be eligible.

1099 Loan vs. Conventional Mortgage

Pros of 1099 Mortgage Loans

• No Tax Returns Needed: Avoids the large drop in qualifying income that heavy business write-offs can cause.


• More of Your Income Counts: Roughly 85%-90% of gross 1099 earnings may be used as qualifying income.


• Flexible Qualification: Works for income that changes from month to month or comes from several clients.

Cons of 1099 Mortgage Loans

• Higher Interest Rates: Because these are non-QM loans, rates are typically higher than conventional mortgages.


• Larger Down Payment: A down payment of 10%-20% or more is usually required.


• Ongoing Income Verification: IRS transcripts and recent proof of current-year earnings, often dated within 90-120 days of closing, are typically required.

1099 mortgage loans are a strong option for independent contractors whose tax returns don't reflect their true earning power. If your income comes from bank deposits or a business you own, also compare Bank Statement Loans and Profit and Loss (P&L) Loans.