1099 Loans for Independent Contractors

What is a 1099 loan?

A 1099 loan is a mortgage that uses the income your clients report to the Internal Revenue Service (IRS) on Form 1099 as your qualifying income. If you are paid as an independent contractor, each payer that meets the reporting threshold sends you a Form 1099-NEC for nonemployee compensation, or in some cases a Form 1099-MISC for other income types.

Conventional underwriting usually qualifies contractors on the net income shown on their personal tax returns, after business expenses are deducted on Schedule C. A 1099 loan, a Non-QM (non-qualified mortgage) program, starts with the gross amounts on the 1099 forms instead.

That difference matters when your deductions are large. Mileage, equipment, a home office, and other legitimate expenses can cut taxable income sharply even though your client payments were steady.

How lenders calculate 1099 income

The lender totals the income on your 1099 forms for the period the program uses, commonly the most recent one or two years, and converts it to a monthly average. Many programs then apply an expense factor, a standard percentage that estimates your costs, to arrive at a net figure.

Here is an illustrative example with round numbers:

Step	Illustrative amount
Year 1 total on Forms 1099-NEC	$110,000
Year 2 total on Forms 1099-NEC	$130,000
Two-year average	$120,000 per year, or $10,000 per month
Expense factor (illustrative)	10%
Qualifying monthly income ($10,000 times 90%)	$9,000

If your income is falling, expect the lender to use the lower recent year rather than the average. Whether an expense factor applies, and how large it is, varies by lender and program. Some programs skip the factor for certain professions with low costs.

How the lender confirms your 1099 income is real

A 1099 form is issued by a client, so lenders usually check it against something else. The most common check is matching the 1099 totals to deposits on your bank statements, which confirms the money actually arrived.

Lenders also want to know the income is likely to continue. They may ask for year-to-date payment records, an invoice history, or a letter or contract showing an ongoing relationship with your main clients. If one client accounts for most of your income, expect extra questions about that relationship. If your 1099 income changed sharply because you switched clients or industries, a short letter of explanation helps.

Platform workers can usually download annual earnings summaries and monthly payout histories from the app or website they work through. Those reports, matched to your bank deposits, often answer the continuity question without a separate client letter.

Who a 1099 loan fits and who it does not

A 1099 loan fits workers paid as contractors who want a simpler income review than full tax returns or a long bank statement analysis. Common examples include:

Real estate agents, loan officers, and other commissioned professionals paid on 1099.
Travel nurses, therapists, and other licensed professionals working as contractors.
Rideshare, delivery, and other platform workers with consistent 1099 income.
Consultants, designers, and freelancers with steady client relationships.

It is a weaker fit if your income comes from many small payers below the reporting threshold, if you are also paid in cash, or if you run a business with employees and significant costs. A bank statement loan or a profit and loss loan may capture that income better. If you are new to contracting, ask early, since lenders usually look for a track record in the same line of work. Requirements vary by lender and program.

Documents you will typically provide

A 1099 loan file is usually shorter than a full self-employed file. A typical package includes:

All Forms 1099-NEC or 1099-MISC for the years used.
Recent bank statements showing the 1099 payments being deposited.
Year-to-date earnings proof, such as payer statements or platform earnings reports.
A letter or contract from major clients, if the lender asks for evidence of continuing work.
Asset statements for the down payment, closing costs, and reserves.
Photo ID and authorization to pull credit.

Some lenders also order an IRS transcript of your 1099 records using a signed authorization, so the forms you provide should match what was filed.

Gather every 1099 you received, not only the largest ones. Leaving a form out can lower your qualifying income, and a form that appears on the transcript but not in your file will prompt questions. If a client sent a corrected 1099, provide the corrected version.

Tradeoffs and costs in plain terms

A 1099 loan typically costs more than a conventional loan. Rates are commonly higher because the lender is accepting gross 1099 income rather than net income verified through tax returns, and terms often depend on your credit, down payment, and how consistent your income has been.

Using gross income can also qualify you for a payment that is larger than your real budget can handle. Your actual expenses still come out of your pocket every month, even if the lender's expense factor is small. Build your own budget from net income before choosing a loan amount.

Taxes deserve their own line in that budget. Contractors usually pay estimated taxes, including self-employment tax, rather than having them withheld. A payment that looks comfortable against gross 1099 income can feel tight after quarterly tax payments, so set those aside first.

Investment property 1099 loans may include a prepayment penalty. Ask whether one applies before you lock.

1099 loan vs. a conventional loan

The key difference is gross versus net: a 1099 loan begins with what clients paid you, while a conventional loan begins with what remained after deductions on your return.

Factor	1099 loan	Conventional loan
Income starting point	Gross income on Forms 1099	Net income on tax returns
Business deductions	Replaced by an expense factor, if any	Reduce qualifying income
Main documents	1099 forms and bank statements	Full personal tax returns and transcripts
Typical cost	Usually higher rate	Usually lower rate

If your returns already show enough income, a conventional loan is usually the less expensive route. If deductions keep your taxable income low, a 1099 loan may close the gap. The Non-QM vs. conventional guide covers the broader tradeoffs.

Who commonly uses 1099 loans

Borrowers who commonly look at a 1099 loan include:

Real estate agents, loan officers, and other commissioned professionals paid on 1099.
Travel nurses, therapists, and other licensed professionals who work as contractors.
Rideshare, delivery, and other platform workers with steady 1099 income.
Consultants, designers, and freelancers with ongoing client relationships.

Depending on the lender, the program can be used for single-family homes, condos, townhomes, and 2 to 4 unit properties, as a primary home, second home, or investment property. Conforming loan limits are set by county, so if you are also weighing a conventional loan, check the FHFA conforming loan limit values for the county where the home is located. Terms, eligibility, and documents vary by lender and are confirmed by a licensed loan officer. The self-employed mortgage guide compares 1099 income with other ways to document what you earn.

How to get started with Mortza

Tell the Mortza AI advisor how long you have worked as a contractor, your 1099 totals for recent years, and how many clients pay you. It estimates qualifying income, flags issues such as declining income or a single large client, and lists what to gather.

The AI advisor does not approve loans. A licensed loan officer reviews your scenario and documents, confirms which programs fit, and gives you real terms. Talk to Mortza to begin.

Common questions

Can I get a 1099 loan with only one year of 1099s?

Some programs accept one year of 1099 income, while others require two. One year can work when you have a longer history in the same line of work, such as moving from a W-2 job to contracting in the same field. Requirements vary by lender and program, so confirm the history needed before applying.

What is the difference between Form 1099-NEC and 1099-MISC for a mortgage?

Form 1099-NEC reports nonemployee compensation, which is how most independent contractors are paid. Form 1099-MISC reports other types of income, such as rents or certain other payments. Lenders mainly look at nonemployee compensation for a 1099 loan, but they may consider other recurring 1099 income if it is documented and likely to continue.

Do I need to provide my full tax returns for a 1099 loan?

Usually the lender does not use your full personal tax returns to calculate income on a 1099 program. It relies on the 1099 forms, bank statements, and sometimes an IRS transcript of your 1099 records. Some lenders may still ask whether returns were filed or check for tax liens as part of the review.

Can I combine W-2 and 1099 income?

Some lenders allow it, but combining income types can push you into a different program. If your W-2 income alone qualifies, a conventional loan may be cheaper. If you need both, a lender may document the W-2 portion with pay stubs and the 1099 portion with forms and deposits. Policies vary by lender and program.

Are gig and app-based workers eligible for 1099 loans?

Often, yes, if the income is reported on 1099 forms and shows a consistent history. Lenders typically confirm the payments with platform earnings statements and bank deposits. Income spread across many small payers or paid partly in cash can be harder to document, and a bank statement loan may fit better in that case.

1099 loans: a mortgage based on your 1099 income