Your 1099s tell the real story.

How does a 1099 income loan work?

A 1099 income loan uses the 1099 forms themselves, one or two years of them, plus a year-to-date earnings statement or bank statements proving the current year is holding pace. An expense factor is applied, but it is far gentler than the bank statement default: commonly 10%, sometimes zero, occasionally up to 20% for expense-heavy trades. The result is divided by the number of months covered.

For many contractors this is simply a better deal than a bank statement loan. A real estate agent whose brokerage 1099s her $228,000 qualifies on roughly $205,000 under a 10% factor. The same agent's business account, averaged and stripped of transfers and refunded commissions, might produce far less.

Two rules shape the outcome more than most borrowers expect. If 1099 income is stable or rising across two years, the lender averages both years. If it is declining, most programs use only the most recent 12 months, the lower number. And if the 1099s are issued to an LLC you own rather than to you personally, expect a larger factor, commonly 15%, or a move to the bank statement or P&L program instead. As with bank statements, a CPA expense letter or CPA-prepared P&L can replace the fixed factor with your actual ratio.

Who is a 1099 income loan built for?

Independent contractors paid by companies they do not own: real estate agents, insurance agents, outside sales reps, consultants, travel nurses and locum physicians, IT contractors, owner-operators, and anyone whose income arrives on a single annual form. Two years in the same line of work is the standard expectation, though not necessarily with the same payer.

How much down payment does a 1099 income loan require?

• Around 10% down at 720+ FICO on a primary residence; 25% down at the 640 floor. The tiers between move roughly 5% at a time.
• Investment property typically 20% to 25% down; second homes 15% to 20%.
• 3 to 6 months of PITIA in reserves is the usual ask, more on jumbo loan sizes.

What documents does a 1099 income loan require?

• One or two years of 1099s, all of them, from every payer you want counted.
• Year-to-date proof of income: a commission statement, a payer's earnings report, or bank statements covering the current year.
• Two years in the same line of work: a license, a broker letter, an employment history, or a CPA letter.
• Two months of asset statements for down payment and reserves.
• Government photo ID, signed application, purchase contract, insurance quote.

What are the advantages of a 1099 income loan?

• The lightest document set of any self-employed program
• Expense factor far smaller than the bank statement default
• Often produces the highest qualifying income of the income-based methods
• Available on primary, second home, and investment property
• Nothing to explain about deposits, transfers, or account activity

What are the trade-offs of a 1099 income loan?

• Only works if the income genuinely arrives on 1099s
• No help for cash businesses or owners taking S-corp distributions
• A weak most-recent year drags the whole average down
• Many lenders will not count a 1099 issued by a company you own
• A declining second year means the lender uses your weaker recent 12 months

Why do 1099 income loans get declined?

• Year-to-date earnings do not support last year's pace. If the 1099 said $228,000 and you are tracking to $120,000, underwriting uses the lower trend.
• Self-issued 1099s. A 1099 from a company you own is either rejected outright or hit with a larger expense factor. That file usually belongs in the bank statement or P&L program.
• A gap in work history, or 1099s from unrelated fields that do not add up to two years in one line of work.
• Income falls short after the factor and there is no second income or lower-priced property to fix it.
• Large unreimbursed business expenses visible in the file, suggesting the fixed factor understates real cost.
• Missing 1099s. Ten payers, eight forms, and the file stalls until the last two arrive.

What does a typical 1099 income loan file look like?

A residential real estate agent five years into her license, 1099'd by her brokerage: $228,000 last year, $195,000 the year before, and a year-to-date pace that supports it. Her tax return, after mileage, marketing, desk fees and a SEP-IRA contribution, shows about $84,000, not enough for the house she wants. On the 1099 program at a 10% expense factor she qualifies on roughly $15,900 a month. FICO 741, 15% down on $640,000, 4 months of reserves.

About these figures: the ranges on this page describe the non-QM lending market as of September 2026. They are not quotes, offers, or commitments to lend. Guidelines, rates, and program availability vary by lender, property type, and borrower profile, and they change often. Your terms are set after a full review of your credit, income documentation, assets, and the property. Not tax or legal advice. Equal Housing Opportunity.