A 1099-only loan qualifies an independent contractor on the gross income shown on one or two years of 1099 forms, with an expense factor applied, instead of on full tax returns. It sits between a W-2 loan and a bank-statement loan: the income is third-party documented but not reduced by every deduction on Schedule C. Requirements for history, expense factor, credit, reserves and down payment vary by investor.
Who this is for
Contractors with one or two years of 1099 income from one or a few payers, who have a stable line of work but returns that net far below gross.
How qualification works
Underwriting totals the 1099 forms for the period, applies an expense factor (a program default or one supported by a CPA), and divides by twelve or twenty-four for monthly qualifying income. Some programs also want a year-to-date statement or a few months of deposits to show the income is continuing. The rest of the file is standard: credit, assets, debt ratio, property.
What I evaluate before it goes to underwriting
- Whether one year or two years of 1099s tells the better story
- The expense factor the program assumes for your line of work, and whether a CPA letter lowers it
- Whether a bank-statement program would produce a higher number than the 1099 route
- Gaps between payers or a payer change inside the window
- Year-to-date continuity
What documentation is needed
- 1099 forms for the most recent one or two years
- Year-to-date earnings statement or recent deposits from the payer
- Two months of bank statements for down payment and reserves
- CPA letter if supporting a lower expense factor; full checklist
Send everything as complete PDFs. Why, and how.
Common underwriting issues
- 1099 income split across many small payers that is hard to verify
- A payer that will not confirm the relationship is ongoing
- A large drop from one year to the next
- Contractors who also have W-2 income that complicates which program fits
Down payment, reserves and pricing
Typically 10% to 25% down depending on credit and program. Rates run above agency pricing. Vesting is individual. Primary, second home or investment occupancy depending on program.
Example scenario
A Realtor in Henderson with two years of 1099s averaging $140,000 gross whose Schedule C nets $61,000 after mileage, marketing and office write-offs. A 1099 program with a 10% expense factor qualifies her at about $10,500 a month, which is the difference between a $350,000 approval and a $520,000 one.
Common questions
One year or two?
Two years is the norm; some programs accept one year with a longer history in the same field.
Do I need tax returns?
Not for qualifying on most 1099-only programs, though some ask for a signed 4506-C to verify the 1099s were filed.
1099 loan or bank statement loan?
If your 1099s cover nearly all your income, the 1099 route is simpler. If income also flows through a business account from other sources, bank statements may qualify more.
Sources
1099-only programs are private-investor products with no single public guideline; terms are set by each investor's matrix and confirmed on your file.
Guidelines are the agencies'; lenders add overlays and change them. Every figure on this page was checked on the review date below and is confirmed again against your file before it goes in a quote.
