1099 Income mortgage Program
If you are self-employed, a freelancer, real estate agent, consultant, rideshare driver, DoorDash driver, or any type of 1099 contractor, getting approved for a mortgage can feel way harder than it should.
A lot of 1099 borrowers make good money. Some make $100,000, $200,000, or more per year. But when they apply for a mortgage, they still get told no.
Not because they cannot afford the house or they are broke. But because their tax returns make it look like they do not make enough money.
That is where a 1099 income mortgage may be able to help.
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What Is a 1099 Income Mortgage?
A 1099 income mortgage is a type of Non-QM mortgage loan that may allow eligible borrowers to qualify using their 1099 income instead of traditional tax returns.
The biggest benefit is simple:
You may not need to show personal or business tax returns.
Instead, the lender may review your 1099 income documentation to calculate qualifying income.
This can be a great option for borrowers who make good money but do not show enough net income on their tax returns.
Now, this is not a magic loan where everyone qualifies. There are still rules, and this is where you need to pay attention.
Basic 1099 Income Mortgage Requirements
Every lender is different, but most 1099 income mortgage programs have a few common requirements.
First, credit matters. Many lenders prefer a credit score around 660+ or higher. Some may allow lower scores, but lower credit usually means a bigger down payment and a higher interest rate.
Second, you should expect to need a larger down payment. Many 1099 income loans require at least 10% down, and that is usually for stronger borrowers. If your credit score is lower, you may need 20%, 25%, or even 30% down.
Third, your 1099 should usually come from an independent company that can be verified by the lender. If you own the company and issue yourself a 1099, this specific program may not be the right fit.
Last, lenders may want to see housing payment history. If you rent, that may mean showing 12 months of rent history. If you already own a home, they may review your mortgage payment history.
Some lenders may also require a CPA letter confirming that you are self-employed or paid by 1099.
How Do Lenders Calculate 1099 Income?
This is one of the most important parts.
Even if the lender does not use your tax returns, they may still not use 100% of your 1099 income.
Many lenders will reduce the 1099 income to account for business expenses. A common example is using 50% of your 1099 income for qualifying.
So if your 1099 shows $100,000 in income, the lender may only use around $50,000 as qualifying income.
That may still be much better than using your tax returns, especially if your net income is very low, but it is something you need to understand before applying.
Who Is a 1099 Income Mortgage Good For?
A 1099 income mortgage may be a good fit if:
- You are paid by 1099
- You make strong gross income
- Your tax returns show low net income
- You have money for a larger down payment
- You have decent credit
- Your 1099s come from an independent company
- You want to buy or refinance but cannot qualify using tax returns
This loan can be especially helpful for borrowers who are clearly making money, but traditional underwriting does not give them enough qualifying income.
Who Is It Not Good For?
A 1099 income loan may not be the best fit if:
- You need down payment assistance
- You have very little money saved
- Your 1099 is issued by your own company
- Your credit score is very low
- You do not have rent or mortgage history
- You qualify normally with a conventional, FHA, VA, or USDA loan
If you can qualify for a traditional mortgage with better terms, that may still be the better route.
The point is not to force a 1099 loan.
The point is to use the right mortgage strategy for your situation.
What Are the Fees on a 1099 Mortgage?
Because 1099 income loans are specialized Non-QM mortgages, they may come with higher lender or broker fees than traditional loans.
You may see loan origination fees around 1.5% to 2.75%, depending on the lender, broker, loan size, and complexity of the file.
Higher loan amounts may sometimes have lower percentage-based origination fees because the dollar amount is already larger.
You should also expect normal closing costs like:
- Title fees
- Recording fees
- Prepaid taxes
- Homeowners insurance
- Escrows
- Appraisal
- Other lender and third-party fees
A rough estimate for total closing costs may be around 3% to 4.5% of the purchase price, but this can vary by state, loan amount, property taxes, and other factors.
Do 1099 Income Loans Have PMI?
One major benefit of many Non-QM loans is that they usually do not have PMI.
That means even if you put less than 20% down, private mortgage insurance may not apply.
This is important because even if the interest rate is higher than a conventional loan, the full monthly payment may be closer than you think once PMI is factored in.
Don’t just compare interest rate to interest rate.
Compare the full payment.
Other Options for Self-Employed Borrowers
If a 1099 income mortgage is not the right fit, you may still have options.
A bank statement loan may allow you to qualify using business or personal bank deposits.
A P&L loan may allow you to qualify using a profit and loss statement.
A DSCR loan may work if you are buying an investment property and want to qualify based on the rental income from the property instead of personal income.
The point is simple: self-employed borrowers usually have more options than they think.
Final Thoughts
If you are paid by 1099 and you have been denied for a mortgage, do not automatically assume you cannot buy a house. You may simply be using the wrong loan program.
A 1099 income mortgage may allow you to qualify without using traditional tax returns, which can be a huge advantage if your write-offs make your income look lower than it really is.
Is it perfect? No.
The rates may be higher. The down payment may be larger. The lender may only use part of your 1099 income. And not everyone qualifies.
But for the right borrower, it can be the difference between being denied and finally being able to buy a home.
Don’t overcomplicate it. The key is matching your income type with the right mortgage program.
Not sure if a 1099 income mortgage is the right fit?
Try Mortgage Match by Andes Mortgage and see which loan options may match your income, credit, down payment, and homebuying goals.