1099 Mortgage: Get a Home Loan as a Freelancer

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• A 1099 mortgage allows borrowers to use their 1099 forms to show their income.
• 1099 mortgages can be smart for self-employed borrowers like freelancers, as well as business owners who take a lot of tax write-offs
• For self-employed borrowers, tax returns often don't reflect their true income.

When mortgage lenders consider your application for a home loan, they have to make sure you can afford your monthly payments. This process is famously challenging for self-employed borrowers, who often lack traditional income documentation.

Fortunately, many lenders offer self-employed mortgage options that can make this process easier. One popular choice: the 1099 mortgage.

Understanding mortgages for the self-employed

Self-employed borrowers don't have the traditional income documents usually required by mortgage lenders, so some companies offer alternative loan programs. 1099 mortgages are just one of these options.

The difference: Income verification

Most mortgage lenders use tax returns to verify a borrower's income and ensure they can comfortably make their new mortgage payments.

A 1099 mortgage, though, uses a borrower's 1099 forms to verify their income in lieu of tax returns. 1099 forms are IRS forms that document income paid to someone who isn't an employee of the payer (think contractors and freelancers, for example).

1099s vs. tax returns

While self-employed borrowers technically have tax returns and could still use those to qualify for a mortgage, it's typically more challenging.

The problem with providing tax returns as a self-employed borrower is that they might not accurately show your income. This is because business owners and self-employed professionals often use a lot of deductions to reduce their taxable income.

Those deductions save them money on taxes, but because mortgage lenders use a borrower's taxable income to calculate how much mortgage they can afford, it can make it difficult to qualify.

Who can benefit from a 1099 mortgage?

Anyone who is not a full-time employee and receives income reported on a 1099 form can benefit from a 1099 mortgage.

Freelancers, contractors, and independent business owners

Typically, freelancers, independent contractors, and other self-employed individuals receive 1099s when they complete work for a business, so these can be great candidates for 1099 mortgages. There are other workers who may receive 1099 income, too.

Those with lots of tax write-offs

While tax write-offs reduce your annual tax bill, they also make it look like you earn less money. If you take a lot of business-related tax deductions , a 1099 mortgage may be the way to go, as it will more accurately show how much you've made in a year — before deductions.

FAQs

Are 1099 mortgages harder to get?

Qualifying for a mortgage with 1099 income shouldn't be any harder than with other documents, but 1099 mortgage requirements vary by company. You will need to meet a minimum credit score and debt-to-income ratio and have 1099s that show you have enough income to cover your new mortgage payments.

Do 1099 mortgages have higher interest rates?

Sometimes 1099 mortgages can come with higher interest rates, as self-employed borrowers can be perceived as slightly riskier. Lenders compensate for this risk by charging a higher rate.

What documents do I need for a 1099 mortgage?

You will need 1099 forms from the businesses you worked for throughout the year. Your lender will also likely want 12 to 24 months of bank statements and potentially a profit-and-loss statement for your business.

Where can I find a 1099 mortgage lender?

Many specialized mortgage lenders offer these, as do some banks and credit unions. You can also speak with a mortgage broker who can help you compare programs from different 1099 mortgage lenders.

Is a 1099 mortgage a good option for me?

If you're self-employed, a freelancer, or a contractor, or your tax returns don't accurately show your income, then a 1099 mortgage could be a good option to explore. You can also look at bank statement mortgage programs, as these can often be helpful for self-employed borrowers, too.