1099 Mortgage Loans in 2026: How Independent Contractors Qualify

Independent contractors are the fastest-growing segment of self-employed borrowers. Their income documentation differs fundamentally from W-2 employees and often from traditional Schedule C filers. A 1099 mortgage program uses the actual 1099s received rather than the tax return, avoiding the write-off problem that disqualifies many contractors through conventional channels.

What a 1099 Mortgage Program Uses for Income

The lender uses 12 or 24 months of 1099s from the same client or multiple clients. Average monthly income is calculated as total 1099s divided by the number of months. Most lenders apply an expense factor of 10% to 25% to account for unreported business expenses, since 1099 income is gross before deductions. Tax returns are not required by the program. Some lenders use bank statements alongside 1099s for corroboration.

Who Qualifies

• ✦Independent contractors with at least 12 to 24 months of 1099 history in the same industry
• ✦Gig economy workers, consultants, and freelancers with documented client relationships
• ✦Borrowers transitioning from W-2 to 1099: some lenders require 12 to 24 months of 1099 history before using this program
• ✦FICO: typically 620 to 660 minimum; 680 for best pricing and highest LTV

1099 vs. Bank Statement: Which to Use

Bank statement programs apply a higher expense ratio of 50% to 80%, which reduces qualifying income more aggressively. A 1099 program uses a 10% to 25% factor, which yields higher qualifying income when gross receipts are high. Use bank statements when deposits exceed 1099 income or when the borrower has mixed income streams. Run both calculations at pre-approval and use whichever produces a higher qualifying figure.

Program Parameters

LTV runs up to 85% on primary residences and 75% on investment properties. Reserves of three to six months PITI are standard. Property types include SFR, warrantable condo, and 2-4 unit. Rate premium over conventional is typically 0.75% to 2% depending on FICO and LTV. These are non-QM products and are not eligible for Fannie, Freddie, FHA, VA, or USDA delivery.