1099 Workers: How to Qualify for a Mortgage

Why It’s Possible for 1099 Workers to Get a Mortgage

Contrary to common belief, independent contractors, freelancers, and gig‑workers can qualify for mortgages. Lenders now recognize non-traditional income sources and offer 1099-specific and Non-QM mortgage programs. These solutions help borrowers without W-2s demonstrate financial stability.

Key Requirements to Qualify

1. Two Years of Consistent 1099 Income

Most lenders require at least two years of verifiable 1099 income to assess income stability. A one-year history could suffice if paired with previous related W-2 employment.

2. Credit Score & DTI

Aim for a credit score of 620+, although 680+ boosts your chances and terms. Lenders also review your Debt-to-Income (DTI) ratio—typically under 43–45%

3. Documentation of Income

Expect to provide:

• 1–2 years of 1099 forms
  
• Personal and business tax returns (including Schedule C/K-1)
  
• Bank statements (12–24 months)
  
• Profit & Loss statements, balance sheets
  
• Contracts or invoices to demonstrate consistent work
  

4. Reserves & Down Payment

Many lenders require:

• At least 10% down payment (sometimes as low as 5% for conventional loans)
  
• Cash reserves covering 3–6 months of PITI (principal, interest, taxes, insurance)
  

5. Income Stability & Business Tenure

Your business should appear ongoing and sustainable. Lenders prefer consistent or increasing income trends—declining income may be averaged conservatively.

Loan Options for 1099 Borrowers

Conventional Loans

• Require 620+ credit score, 2 years of tax returns, and 3–20% down
  
• Best if taxes reflect net income post-expenses
  

FHA Loans

• Accept flexibly as low as 580 credit score with 3.5% down
  
• Still require income documentation and two-year history
  

Bank Statement Loans (Non-QM)

• Evaluate income based on 12–24 months of bank deposits
  
• Ideal for self-employed individuals with high write-offs
  

1099-Specific or Non-QM Loans

• Some lenders use only 1099 forms as income proof
  
• Often require 10% down, higher interest rates, 620+ credit scores

Steps to Boost Approval Odds

• Track Income Regularly: Maintain up-to-date P&Ls, bank statements, and client contracts.
  
• Separate Business & Personal Finances: Open separate checking accounts and business credit lines .
  
• Raise Credit Score: Pay bills timely, reduce credit use, fix errors .
  
• Reduce DTI: Pay down debts and avoid new loans before applying.
  
• Save Reserves: Aim for 3–6 months of PITI; more if pursuing Non-QM loans.
  
• Choose Experienced Lenders: Seek out Non-QM or 1099-specialized lenders for best results.
  
• Consider a Co-borrower: If income is low or inconsistent, a co-borrower can help qualify.
  
• Leverage a Mortgage Broker: They can match you to lenders comfortable with self-employed income.
  

Mortgage Application Process (1099 Borrowers)

1. Pre‑Qualification: Provide basic info (income, debts, assets) to estimate eligibility
   
2. Gather Documentation: Prepare all required forms, statements, and tax returns.
   
3. Apply for Loans: Compare conventional, FHA, bank-statement, and 1099 loans.
   
4. Verification & Underwriting: Lender reviews your paperwork, credit, and DTI
   
5. Loan Estimate & Terms: Review offers, interest rates, and loan details.
   
6. Close the Loan: Finalize documents, pay closing costs, and take ownership
   

Frequently Asked Questions

Read Next

• Evaluating the Pros and Cons of FHA Refinancing
• FHA Loan Income Requirements: A Complete Guide