The forms are totalled
The lender uses the 1099 forms themselves instead of tax returns. Most programs accept one year of forms, and some prefer two; with two years, the forms cover a longer period and the lender works from both.
1099 loans
1099 mortgage loans for independent contractors and commission earners.
A 1099 mortgage uses your 1099 forms instead of tax returns to show what you earn. Here is who it suits, how the income is worked out, what you need, and how to start.
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Fidelity Residential · NMLS #103098 · Equal Housing Lender
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- A licensed loan officerA real person reviews your file and answers your questions.
- Several 1099 programsWe compare programs to find the rules that fit how you are paid.
- Apply online or by phoneStart a quote, apply online or call 732-686-9999.
The basics
What a 1099 loan is
A 1099 loan is for independent contractors, freelancers, gig workers and commission earners who are paid on IRS Form 1099 rather than a W-2. Instead of tax returns, the lender uses the 1099 forms themselves: most programs accept one year of forms, and some prefer two.
A standard allowance for work expenses is taken off before the income is counted, and the rest is averaged by month. The lender also checks that the income is still coming in this year and obtains the IRS record of your 1099s.
These loans are not sold to Fannie Mae or Freddie Mac, so each program sets its own rules. Your credit, your savings, the appraisal and your debts compared with your income are still checked, and for a home you live in the lender must make a good-faith decision that you can repay the loan. Income, credit, assets and the home are all verified; this is not a stated-income loan.
Who it suits
- Independent contractors and freelancers paid on 1099 forms
- Gig workers paid through a platform or an agency
- Commission earners, such as real estate agents and sales people paid on commission
- A steady line of work: most programs want about two years in the same field, and a recent move from employee to contractor with the same company can be accepted
1099 income is for people paid on 1099 forms. If you own a business, see bank statement loans and profit and loss loans; if you are paid wages, see employer verification loans.
1099 loans at a glance
- What it is: a mortgage for someone paid on IRS Form 1099, with the 1099 forms for one or two years taking the place of tax returns.
- Who it is for: independent contractors, freelancers, gig workers and commission earners, usually with about two years in the same line of work.
- What you need: your 1099 forms for the most recent one or two calendar years; a recent pay statement or bank statements showing the income is still coming in; your permission for the lender to obtain the IRS record of your 1099s; statements for the down payment and closing costs; photo identification.
- How the income is counted: a standard allowance for work expenses is taken off the 1099 total, and the rest is averaged by month.
- Not: a stated-income loan. Income, credit, assets and the home are all verified. The bank statement income calculator has a 1099 method that shows how the figures you enter would be read; it is an estimate, not what you will be offered.
The income
How 1099 income is worked out
The lender starts from the totals on your 1099 forms, not from the income left after deductions on a tax return. Four things happen to that figure.
An allowance for expenses
A standard allowance for work expenses is taken off before the income is counted: in most programs about a tenth of the 1099 total, more for a business with real overheads, and sometimes none when the payer confirms you have no job-related expenses.
Averaged by month
What is left is divided by the months the forms cover, giving the monthly income the program counts. Your debts compared with that income are then checked as on any mortgage.
This year’s earnings and the IRS record
The lender checks that the income is still coming in this year, with a recent pay statement or bank statements, and obtains the IRS record of the 1099s so the forms and the record agree.
A co-borrower’s wages
A spouse’s or co-borrower’s regular wage income can be added to your 1099 income, documented the usual way with pay stubs and W-2 forms.
See it with your own figures
Our bank statement income calculator has a 1099 method: enter the totals on your forms and the expense allowance, and it shows the arithmetic step by step. An estimate from your figures, not an offer or a loan decision.
Open the calculatorA worked example, in words. Say you are an independent contractor. Several clients send you 1099 forms each year, write-offs make your tax return show much less than you earned, and you want to buy a home to live in.
- The starting figure. The lender adds up your 1099 forms, starting from what your clients paid you rather than the income left after deductions on your tax return.
- The expense allowance. A standard allowance for work expenses comes off the total, in most programs about a tenth, more for a business with real overheads, and sometimes none when the payer confirms you have no job-related expenses.
- The monthly income. What is left is divided by the months the forms cover. With one year of forms, that is one year; with two, the lender works from both.
- This year. A recent pay statement or bank statements show the income is still coming in, and the lender obtains the IRS record of your 1099s so the forms and the record agree.
- The rest of the file. Your credit, your savings, the appraisal and your debts compared with that monthly income are checked as on any mortgage, and for a home you live in the lender must make a good-faith decision that you can repay the loan.
- Compare. If your clients pay you into an account you could show instead, a loan officer can work your income out from your bank statements too. And if your tax returns already show strong income, ask for a conventional quote as well: it may cost less.
The calculator’s 1099 method shows the arithmetic with your own figures, and the mortgage payment calculator gives a first estimate of the payment. Both are estimates, not offers. Deciding between the two ways? See bank statement or 1099 loan.
Requirements
1099 loan requirements: what you need
The 1099 forms are not the only document. Most borrowers can start with these.
- Your 1099 forms for the most recent one or two calendar years
- Proof the income is still coming in this year: a recent pay statement or bank statements
- Your permission for the lender to obtain the IRS record of your 1099s
- About two years in the same line of work, in most programs; a recent move from employee to contractor with the same company can be accepted
- Statements for the down payment, closing costs and savings after closing
- Photo identification for each borrower
Still checked, as on any mortgage. Your credit, your savings, the appraisal and your debts compared with your income, and for a home you live in the lender’s good-faith decision that you can repay the loan. Primary homes, second homes and rental properties are all possible, with the largest financing on a primary home, and first-time buyers can use this program.
Before you apply: moves that keep a 1099 file moving
None of these is a requirement on its own. Together they make the file easier to read.
- Gather every 1099 form for the years the program uses; the form for nonemployee pay is the 1099-NEC
- Talk to a lender before you file your next return, and bring your CPA into that conversation
- Keep your pay landing in one account, so this year’s earnings are easy to show
- Avoid unexplained cash deposits in the months before you apply, and write a short note for any large deposit
- Do not open new credit or make large purchases on credit while your loan is in process
- Answer document requests quickly: each day a request waits is a day added to the timeline
The full list, route by route: mortgage documents for the self-employed.
How it works
The steps to a 1099 loan
Talk about how you are paid
Who pays you, for how long, whether the 1099s are in your name, and the home you want to buy or refinance.
Send your 1099s
The forms for the most recent one or two years, plus a recent pay statement or bank statements for this year.
The income is worked out
The expense allowance is taken off, the rest is averaged by month, and the IRS record of your 1099s is obtained.
Underwriting and closing
Credit, savings and the appraisal are reviewed as on any mortgage. You review your closing disclosure and sign.
Questions
Common questions about 1099 loans
Do I need to send tax returns?
No. The lender uses the 1099 forms themselves instead of tax returns, and obtains the IRS record of the 1099s to confirm them. Tell your loan officer which route you want.
How much of my 1099 income counts?
A standard allowance for work expenses is taken off first. In most programs it is about a tenth of the 1099 total, more for a business with real overheads, and sometimes none when the payer confirms you have no job-related expenses. The rest is averaged by month. The calculator’s 1099 method shows the arithmetic with your own figures.
I have only one year of 1099s. Is that enough?
Often, yes. Most programs accept one year of forms, and some prefer two. Most also want about two years in the same line of work, and a recent move from employee to contractor with the same company can be accepted.
I just moved from employee to contractor. Can I still use this?
A recent move from employee to contractor with the same company can be accepted, because the work and the employer are the same. A loan officer can check which programs fit your dates.
Can my spouse’s wages be added?
Yes. A spouse’s or co-borrower’s regular wage income can be added to your 1099 income, documented the usual way.
Can I buy a second home or a rental property?
Yes. Primary homes, second homes and rental properties are all possible; the largest financing is on a primary home. A loan officer can tell you which programs fit the home you have in mind.
I am a first-time buyer. Can I use a 1099 loan?
Yes. First-time buyers can use this program. The same checks of credit, savings and the appraisal apply.
Is my income still verified?
Yes. The lender reviews the 1099 forms, checks that the income is still coming in this year with a recent pay statement or bank statements, obtains the IRS record of the 1099s, and checks your credit, savings and the home’s value. For a home you live in, the lender must make a good-faith decision that you can repay the loan.
What is a 1099 mortgage?
A loan for independent contractors and commission earners that uses the 1099 forms instead of tax returns to show what you earn. Your credit, savings, the appraisal and your debts are still checked. It is not a stated-income loan.
What is the difference between a 1099 loan and a bank statement loan?
The document the income comes from. A bank statement loan works out your income from the deposits in your bank statements, and suits business owners. A 1099 loan works it out from your 1099 forms, and suits independent contractors and commission earners. Neither uses your tax returns for income. If you are paid on 1099 forms and deposit the money in your bank, either may work; see bank statement or 1099 loan.
Is a 1099 loan always cheaper than a conventional loan?
No. If your tax returns already show strong income, a conventional loan may cost less. Ask a licensed loan officer to price both so you can compare.
Which 1099 forms does the lender use?
The 1099 forms you receive for your work, for the most recent one or two calendar years. The form for nonemployee pay is the 1099-NEC. The lender adds up every form for each year and obtains the IRS record of your 1099s so the forms and the record agree.
Can I refinance with a 1099 loan?
Yes. A 1099 loan can buy a home or refinance the one you have, and your income is worked out the same way. If you want to take cash out, ask your loan officer which programs allow it for your file.
Do you lend in my state?
Fidelity Residential is licensed in many states. The full, current list is on NMLS Consumer Access (opens in a new tab), or call us at 732-686-9999.
Ready to talk about a 1099 loan?
Get a quote, apply online, or talk it through with a licensed loan officer.
This page is general information, not a commitment to lend. Programs, terms and eligibility depend on credit, income, property and underwriting review and are subject to change without notice.
Reviewed by Robert Shamie, CEO, NMLS #241428 · Last reviewed:
Fidelity Residential (PFN Lending Group, Inc., NMLS #103098) is a direct mortgage lender licensed in 40 states and the District of Columbia, with 26 years in business.