A 1099 mortgage qualifies you on the income reported on your 1099 forms instead of your full tax returns. The lender uses your gross 1099 income with a flat expense factor, so business write-offs do not sink your qualifying power. It fits independent contractors, gig workers, and commission earners in Houston who earn well but show low net income after deductions, and it fits physicians and dental associates paid on a 1099 whose retail physician desk asked for two years of returns they do not have yet.
Independent contractors face a frustrating catch. You earn a strong living, but the tax deductions that keep your bill low also shrink the income a conventional lender will count. Grossing $150,000 means little when your return shows $70,000 net after write-offs, because a conventional loan qualifies you on the smaller number.
A 1099 mortgage flips that math. Instead of digging through two years of deducted tax returns, the lender qualifies you on the gross income printed on your 1099s and applies a simple expense factor. The 1099 program is one of several non-QM loan options for self-employed borrowers. For a deeper walkthrough of the contractor scenario, read our blog post on the 1099 contractor mortgage in Houston.
What This Means for Houston Contractors
Your gross 1099 income does the qualifying, not your heavily deducted net.
No full personal and business tax returns required on most programs.
A shorter income history is often acceptable, sometimes as little as one year.
What Is a 1099 Mortgage?
A 1099 mortgage is a home loan designed for borrowers who receive 1099 forms rather than W-2s. Instead of asking for full tax returns, the lender totals the gross income on your 1099s and applies a fixed expense ratio to estimate qualifying income. That number feeds your debt-to-income calculation the same way a salary would. The program exists because the standard conventional method, which relies on net income after every deduction, penalizes contractors who use the tax code the way it is meant to be used.
How 1099 Income Qualifies
The process is simpler than a conventional self-employed file. The lender adds up the gross income shown on your 1099s, usually across one or two years, then applies an expense factor rather than requiring you to document each deduction.
1099 Qualifying Income
The expense factor is set by the program, often around 90%
In this example, a contractor grossing $150,000 qualifies on $135,000 when the program counts 90 percent of gross and treats the rest as expenses. Compare that to a conventional loan that might only count the $70,000 net shown on the tax return. The 1099 method nearly doubles the qualifying income in this case. The exact expense factor varies by lender and by the type of work you do.
The Write-Off Problem
Every deduction you take lowers your taxable income, which saves you money in April but costs you buying power when you apply for a conventional mortgage. Mileage, home office, equipment, supplies, and contractor payments all reduce the net figure a traditional underwriter uses. The better you are at managing your taxes, the worse your conventional application looks.
This is the core reason 1099 mortgages exist. They let you keep taking legitimate deductions without being punished for them at the closing table. A borrower who would be declined on net income can qualify comfortably on 1099 gross. Self-employed buyers with more complex structures should also compare the self-employed mortgage path and the bank statement loan option.
Who Is a 1099 Mortgage For?
Independent Contractors
Tradespeople, consultants, and freelancers paid on a 1099
Gig Workers
Rideshare, delivery, and platform workers with 1099 income
Commission Earners
Sales professionals and real estate agents paid on commission
If you receive 1099s and your tax returns understate what you truly earn, this program is likely your best route. It also helps newer independent workers who lack the full two-year history conventional loans demand.
It comes up constantly with medical professionals too, since so many hospitalist and dental associate positions are written as independent contractor agreements now, and the retail physician desks are built for W-2 offers. If that's your situation, I've written up how the programs handle 1099 physicians and dental associates and which contract language keeps you out of the self-employed lane.
The Bank Statement Alternative
Not all self-employed income lands cleanly on 1099s. If you are paid through a mix of channels, or you run a business where deposits reflect your cash flow better than your 1099s do, a bank statement loan may fit better. It qualifies you on 12 to 24 months of deposits instead of 1099 totals. Many contractors compare both and pick the one that produces the higher qualifying income.
| Feature | 1099 Mortgage | Bank Statement Loan |
|---|---|---|
| Income Proof | 1099 forms | Bank deposits |
| Best For | Cleanly documented 1099 income | Mixed or deposit-based income |
| History Reviewed | 1-2 years of 1099s | 12-24 months of statements |
| Tax Returns | Not required | Not required |
General Requirements
What Your Down Payment Is Actually Doing
The down payment is the number most people check first, and very often it is the only number they check, which is what makes it worth a few minutes of your time.
On the programs I work with most, your down payment is doing more than showing the lender you have something at stake. It is the lever that moves your rate, and on some files it is what decides which programs will look at you at all. A borrower with a thinner credit profile can often reach the same approval as a stronger borrower simply by bringing more to the table, and that trade is real, so it is worth understanding before you decide you are short.
It also helps to know why the figure on this page is a range rather than one fixed number. Where you land inside it comes down to your credit, whether the home is going to be your primary residence or an investment property, the property type, and how much documentation you can put behind your income. Occupancy usually moves it the most, so the same program will almost always ask for less on the home you are going to live in than on the rental you are going to hold. If you come across two different figures for what looks like the same loan, that is very often the reason.
Here is the part that catches people, and it is worth knowing early rather than late. Your down payment is not the whole number you need. It sits alongside your closing costs, and then on most of these programs the lender wants to see reserves still there after both of those have gone out. So the real cash question is not what percentage you can put down, it is what is left standing once the down payment and the closing costs and the reserves have all been counted. That is a figure I would much rather you know on day one than in the middle of an offer.
The good news is that it tends to be a more solvable problem than it looks. Gift funds are accepted on a lot of these programs, seller concessions can cover a meaningful share of your closing costs, and moving up one bracket on the down payment will often buy back enough on the rate to be worth it across the years you hold the loan. So the useful question is not what the minimum is, it is what the right number is for your file, and that is a short conversation rather than a long one.
If you want to know where you actually land, send me your numbers and I will run them before you write an offer. Would love to help you get a clear picture of it.
On a 1099 program the figure on this page moves with your credit score, the property type, and how much 1099 history you can show, and a longer and steadier history generally moves you toward the lower end of that range.
Before you apply, print the 1099 document checklist so you gather everything in one pass instead of three.
What You Do NOT Need
- Full personal and business tax returns
- Qualifying on heavily deducted net income
- W-2s or a traditional employer
- Two years in business on every program
1099 Mortgage vs Conventional
| Feature | Conventional | 1099 Mortgage |
|---|---|---|
| Qualifies On | Net income after deductions | Gross 1099 income |
| Documentation | Two years of tax returns | 1099 forms |
| Write-Off Impact | Lowers qualifying income | Minimal impact |
| History Required | 2 years minimum | As little as 1 year |
| Down Payment | 3-20% | 10-20% |
| Interest Rate | Lower | Modestly higher |
How to Get Started
- Send me your recent 1099s and the price range you are targeting
- I calculate your qualifying income using the 1099 method
- Get pre-approved so you can shop with confidence
- Close on your Houston home
I work with contractors and gig workers across Houston in both English and Vietnamese, so the numbers are clear from the start.
Frequently Asked Questions
What is a 1099 mortgage?
A 1099 mortgage is a home loan that qualifies you using your 1099 income forms instead of full personal and business tax returns. The lender looks at the gross income reported on your 1099s, applies an expense factor, and uses the result as your qualifying income. It is built for independent contractors, gig workers, and commission earners who receive 1099s rather than W-2s and who lose qualifying power when tax write-offs shrink their reported net income.
How does 1099 income qualify for a mortgage in Houston?
The lender totals the gross income shown on your 1099s, usually over one or two years, then applies a fixed expense ratio to estimate your net qualifying income rather than making you document every business deduction. For example, a lender might count 90 percent of your 1099 gross as qualifying income and treat the remaining 10 percent as expenses. That figure goes into your debt-to-income calculation. This approach avoids the write-off penalty that tax returns create, where legitimate deductions lower the income a conventional lender will count.
Who is a 1099 mortgage for?
A 1099 mortgage fits independent contractors, freelancers, gig workers, real estate agents, sales professionals on commission, consultants, and any self-employed borrower paid on a 1099. If you earn good money but your tax returns show low net income after deductions, or you have not been self-employed long enough for a full two-year conventional history, a 1099 program often qualifies you when a traditional loan will not.
What is the write-off problem for 1099 earners?
Independent contractors deduct business expenses to lower their taxable income, which is smart at tax time but works against them on a conventional mortgage. Conventional lenders qualify you on net income after those deductions, so a contractor who grosses $150,000 but writes down to $70,000 net gets judged on the $70,000. A 1099 mortgage solves this by qualifying on gross 1099 income with a flat expense factor instead of your full deducted net, which usually produces a higher qualifying income.
Can I get a 1099 mortgage without two years of tax returns?
Often yes. Many 1099 programs accept a shorter history than the two full years of tax returns conventional loans require. Some lenders qualify on one year of 1099s, and a few consider borrowers with as little as 12 months in the same line of work. Requirements vary by lender and depend on your credit, down payment, and how stable your 1099 income looks year over year.
What is the difference between a 1099 mortgage and a bank statement loan?
Both are non-QM programs for self-employed borrowers, but they use different proof of income. A 1099 mortgage qualifies you on the gross income reported on your 1099 forms. A bank statement loan qualifies you on the deposits into your bank accounts over 12 to 24 months. If your income is cleanly documented on 1099s, the 1099 program is often simpler. If you are paid in ways that do not all show up on 1099s, a bank statement loan may capture more of your real cash flow.
What loan to value can I reach on a 1099 mortgage in Houston?
Most 1099 mortgage programs land somewhere between 80 and 90 percent loan to value, so what you bring in is whatever sits above that ceiling, and where your file lands is driven by your credit score, the property type, and the strength of your income history. Coming in under the ceiling can offset a thinner credit profile or a shorter self-employment history. Because these are non-QM loans, the documentation is more flexible than conventional financing while the equity expectation runs a tier higher.
Is the down payment the only cash I need at closing?
No, and this is the thing that surprises borrowers most often. Your down payment sits alongside your closing costs, and most of these programs also want to see reserves remaining in a verifiable account after the down payment and the closing costs have both gone out. So the number that decides whether a purchase works is not the down payment percentage on its own, it is the total once all three are counted. Gift funds are accepted on many programs and seller concessions can cover part of your closing costs, so there is usually more room than the percentage alone suggests. Send your numbers over and I will walk through the full picture with you before you write an offer.
Related Programs
- Non-QM Loans Houston - Compare every alternative documentation program
- Self-Employed Mortgage - Options for business owners and the self-employed
- Bank Statement Loans - Qualify on 12 to 24 months of deposits
- Asset Depletion Loan Houston - Qualify on liquid assets instead of income
- DSCR Loans - Investment property financing based on rental income
- 1099 Contractor Mortgage Guide - A deeper walkthrough of the contractor scenario
- physician and dentist 1099 income in Texas - How contract and production pay is qualified for doctors and dental associates
See What Your 1099 Income Qualifies For
Send me your recent 1099s and target price. I will run the 1099 qualifying math and show you the number. Takes minutes.
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