What Is a 1099 Loan?

A 1099 loan is a mortgage program designed for independent contractors, freelancers, and self-employed professionals who earn income through 1099s rather than a traditional paycheck. Instead of requiring W-2s or tax returns, lenders verify your income using your 1099 forms from the past one to two years.

This matters because most self-employed borrowers take legitimate business deductions that significantly reduce their taxable income — which can make it look like they earn far less than they actually do. A 1099 loan sidesteps that problem by qualifying you on your gross income before those deductions.

Who It’s For

• Freelancers and independent contractors
• Consultants and professional service providers
• Gig economy workers (rideshare, delivery, creative, tech)
• Real estate agents and mortgage professionals
• Any borrower who receives 1099 income and doesn’t have W-2s to show

Key Benefits

• No W-2s, tax returns, or pay stubs required
• Qualify using gross 1099 income — not your after-deduction taxable income
• 1 or 2 years of 1099s accepted depending on the lender
• Great for borrowers with significant business write-offs
• Flexible option when conventional financing doesn’t fit
• Available for primary residences, second homes, and investment properties

How Income Is Calculated

This is where the 1099 loan works differently from a conventional mortgage — and in your favor.

Lenders typically take your gross 1099 income, apply a standard 10% expense deduction, and divide by 12 to determine your monthly qualifying income:

Gross 1099 Income × 90% ÷ 12 = Monthly Qualifying Income

For example: $120,000 in annual 1099 income × 90% ÷ 12 = $9,000/month qualifying income

Alternatively, if you have a CPA-prepared profit and loss statement, some lenders will use that instead of the flat expense ratio — which can be beneficial if your actual expenses are lower than 10%.

How to Qualify

Credit Score: Minimum 620. Higher scores improve your rate and terms.

Down Payment: Typically 10–20% depending on loan size and lender.

Self-Employment History: Generally 2 years of 1099 income required. If you recently transitioned into self-employment in the same field, some lenders will consider 1 year.

Documentation Required:

• 1–2 years of 1099 forms
• Year-to-date earnings documentation (bank statements, CPA letter, or WVOE)
• Government-issued ID
• Asset statements

How the Process Works

1. Connect with a Loan Officer Share your income history, goals, and 1099 situation. We’ll confirm whether this program fits and what you’ll need to move forward.

2. Submit Your 1099s Provide one to two years of 1099 forms plus supporting income documentation. We’ll calculate your qualifying income and identify the right loan options.

3. Close on Your Home Once approved, we guide you through appraisal, underwriting, and closing — on a timeline similar to a conventional mortgage.

Why New Story Lending

We’re an independent mortgage bank in Upstate South Carolina with real experience in non-QM lending. We work with 1099 earners regularly — freelancers, contractors, consultants — and we understand that your financial picture doesn’t always fit neatly into a tax return.

Our team is bilingual (English and Spanish), and we take the time to explain your options clearly so you can make the right decision for your situation — not just the one that’s easiest to process.

Frequently Asked Questions

What is a 1099 loan? A mortgage that uses your 1099 income forms instead of W-2s or tax returns to verify income. Designed for independent contractors, freelancers, and self-employed professionals.

Do I need to provide tax returns? No. The 1099 loan program is specifically designed to avoid reliance on tax returns, which often understate income due to business deductions.

How much can I borrow? Loan amounts vary by lender and your qualifying income. Talk to a loan officer to get a clear picture based on your specific 1099 history.

What if my 1099 income varies year to year? Lenders typically average your income over one to two years to smooth out fluctuations. Consistent or growing income over that period strengthens your application.

Can I use a 1099 loan to refinance? Yes. 1099 loans are available for purchases and refinances, including cash-out refinances.

What’s the difference between a 1099 loan and a bank statement loan? Both are non-QM options for self-employed borrowers. A 1099 loan uses your 1099 forms to verify income; a bank statement loan uses deposit history. Depending on your situation, one may qualify you for a higher loan amount than the other. A loan officer can help you compare both.

Have more questions? Contact us — our loan officers are happy to walk you through your options.