If you're paid on 1099s, your tax return probably shows far less income than you actually earn, because of business deductions. A 1099 loan qualifies you on your gross 1099 income minus a flat expense factor, so your write-offs don't shrink the number a lender sees.
Who 1099 Loans Are For
- Independent contractors and consultants
- Real estate agents, loan officers, and other commission earners
- Rideshare, delivery, and other gig workers
- Nurses, IT professionals, and others working through staffing agencies on 1099s
How 1099 Income Is Calculated
Lenders total your 1099s for the last one or two years and subtract a flat expense factor, most often 10%. Some use a higher factor for certain industries, or a lower one supported by a CPA letter. If your income is falling, they may use the lower, more recent year.
Example: $96,000 in 1099s. After a 10% factor, qualifying income is $86,400, or $7,200 a month. A tax return with $40,000 in deductions would show only $56,000.
1099 Loan Requirements
| Guideline | Typical | Strongest files, at some lenders |
|---|---|---|
| Credit score | 620–660 | From about 600; no-score options at a few |
| 1099 history | 2 years | 1 year with the same payer |
| Expense factor | Flat 10% | Same; lower with CPA support at some |
| Max LTV, primary purchase | 80–85% | Up to 90% with strong credit |
| Max LTV, cash-out | 70–75% | Up to 80% |
| Loan size | Up to $2–3 million | Up to $4 million |
| Property | Primary, second home, investment | Same |
What to Have Ready
- 1099 forms for the last one or two years
- Year-to-date earnings, such as payment statements or recent bank deposits
- IRS wage and income transcripts, which many lenders use to confirm the 1099s
- Proof of your work history, often one to two years with the same payer or in the same field
- Two months of bank statements for your down payment and reserves
Common Issues
- 1099s paid to your LLC: some lenders allow it with a CPA letter confirming ownership, sometimes with a higher expense factor. Others require 1099s in your name.
- New payer: switching companies recently may require two years of history, or proof you've stayed in the same line of work.
- Mixed W-2 and 1099 income: many lenders can combine them.
1099 Loans vs. Other Options
If you run a business with employees or real expenses, a bank statement or P&L loan may fit better. If you're buying a rental, a DSCR loan skips personal income entirely.
1099 Loan FAQ
Can I get a mortgage with only one year of 1099s?
Yes, at many Non-QM lenders, if you've worked with the same payer for at least a year. Two years opens up more options.
What expense factor do lenders use for 1099 income?
Most use a flat 10%. Some use more for certain industries, and some allow a lower factor with a CPA letter.
Do I need tax returns for a 1099 loan?
No. Lenders use your 1099s, recent pay records, and often IRS transcripts, but not your full tax returns.
Can real estate agents use 1099 loans?
Yes. Commission-based agents are one of the most common 1099 borrowers.
In the financial industry since 2015. Licensed loan officer in Los Angeles, California. NMLS #1493724, with UTM Financial, LLC (NMLS #2591548). More about Ivan
This article is general education, not financial, tax, or legal advice. Loan guidelines vary by lender and change often. Not a commitment to lend.