Non-QM Income Program

1099 Only Loans:
Qualify on Gross 1099 Income

Independent contractors and gig workers can qualify using 1099 forms instead of tax returns. Income is calculated from gross 1099 earnings, not the reduced net on your Schedule C.

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✓ No tax returns required✓ Gross 1099 income used✓ Contractors & gig workers✓ 10% down primary

The Basics

What Is a 1099 Only Loan?

A 1099 only loan qualifies independent contractors and freelancers based on the gross income reported on their 1099 forms rather than the net income shown on their tax return's Schedule C. This distinction matters enormously, the gap between gross 1099 earnings and Schedule C net income can be tens of thousands of dollars after business deductions are applied.

When a conventional lender underwrites a self-employed borrower, they use the bottom-line net income from the tax return. For a freelancer who grosses $150,000 annually but deducts home office expenses, vehicle costs, equipment, software subscriptions, and health insurance premiums, the Schedule C net might only show $75,000. A 1099 only loan lets that same borrower qualify closer to their actual gross earning capacity.

This is one of the most accessible Non-QM programs because independent contractors already receive 1099 forms from their clients, there is no additional document to create or CPA to engage. The 1099s themselves serve as the primary income documentation.

Tax returns required

620+

Typical min. credit score

10%

Minimum down (primary)

12-24

Months of 1099s

Income Calculation

How 1099 Income Is Calculated

The income calculation on a 1099 loan is one of the simplest in the Non-QM space. Lenders total the gross amounts from your 1099 forms, then apply an expense factor to determine qualifying income. The key advantage over tax-return-based underwriting is that the expense factor is typically far less aggressive than your actual Schedule C deductions.

Gross 1099 Method

Lenders collect all 1099-NEC and 1099-MISC forms from the qualifying period (12 or 24 months). The total gross income is then reduced by a standard expense factor, commonly 10% to 25% depending on the lender and your industry.

Example: $120,000 in gross 1099 income over 12 months with a 15% expense factor = $8,500/month qualifying income.

Why This Beats Schedule C

The same borrower filing a tax return might show $65,000 net on Schedule C after deducting home office, vehicle, equipment, and other legitimate expenses. That produces only $5,416/month in qualifying income, a $3,084/month difference that could mean the difference between approval and denial.

The 1099 program acknowledges that business write-offs are a tax strategy, not a reflection of inability to pay a mortgage.

1099 loan vs. bank statement loan, which is better for contractors?

If you receive all or most of your income via 1099 forms, the 1099 program is typically simpler and may price slightly better because the income documentation is clearer. Bank statement loans are better when your income comes from diverse sources including cash, direct transfers, or clients who don't issue 1099s. Mortgages by Channing will compare both options for your specific file.

Requirements

1099 Only Loan Requirements

Requirement	Typical Standard
Credit Score	620+ (better pricing at 700+)
Income Documentation	12 to 24 months of 1099 forms
Self-Employment History	2 years as independent contractor (verified)
Min. Down (Primary)	10% (at 680+ credit)
Min. Down (Investment)	20 to 25%
Tax Returns Required	No
Max Loan Amount	Up to $2.5M+ on some programs
Property Types	Primary, second home, investment
IRS Verification	1099 transcripts pulled via IRS to confirm amounts

The credit score requirements for 1099 loans follow standard Non-QM tiers. Borrowers at 700+ receive the most favorable rates, while those between 620 and 680 remain eligible but should expect adjusted pricing and potentially tighter loan-to-value limits.

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Ideal Borrowers

Who Qualifies for a 1099 Only Loan?

The 1099 program is built for a specific type of self-employed worker, those who receive formal income reporting from their clients. Understanding whether your income structure fits is important before applying.

Strong Candidates

Freelancers and independent contractorsWriters, designers, consultants, IT contractors, and other 1099 professionals.
Gig economy workersRideshare drivers, delivery workers, and platform-based service providers who receive 1099-NEC or 1099-K forms.
Real estate agents and insurance agentsCommission-based professionals who are paid as independent contractors by their brokerage.
Sales reps and consultantsAnyone receiving 1099 compensation from one or more companies for contracted services.

May Need a Different Program

Business owners with employeesIf you run a business entity (LLC, S-Corp), a P&L only or bank statement program may be more appropriate.
Cash-based incomeIf clients pay you in cash or direct deposit without issuing 1099s, there are no forms to document your income.
Retirees or investorsIf your income comes from investments or retirement accounts, asset depletion is the better fit.

Common Questions

1099 Only Loan FAQ

Yes. Most lenders accept 1099-K forms (used by payment platforms like rideshare and delivery apps) alongside traditional 1099-NEC and 1099-MISC forms. The key is that the forms must be issued by the paying entity and the amounts must match IRS transcripts. If your platform reports income on a 1099-K, it counts toward your qualifying income the same way a 1099-NEC would.

Expense factors vary by lender and sometimes by industry, but commonly range from 10% to 25% of gross 1099 income. This is significantly less than the deductions most contractors take on Schedule C, which is precisely why the program produces higher qualifying income. Your loan officer can confirm the exact factor for your scenario before you commit to the application.

You need to provide 1099s that represent your qualifying income. If you have multiple clients, the lender will total all provided 1099 forms. Clients who paid you less than $600 in a year are not required to issue a 1099 under IRS rules, so some smaller income sources may not be documentable through this program. Focus on 1099s from your primary clients.

Yes. Lenders pull IRS transcripts (Form 4506-C) to verify that the 1099 amounts you provide match what was reported to the IRS. If there is a discrepancy between the 1099 you present and the IRS transcript, the lender will use the lower figure. This is a standard verification step and should not cause concern if your documents are accurate.

Some lenders allow hybrid qualification using both W-2 and 1099 income. However, the 1099 portion is underwritten under Non-QM guidelines while the W-2 portion may be underwritten conventionally. Not all lenders offer this structure, so it depends on the specific program. Mortgages by Channing can identify lenders that accommodate blended income sources.

Yes, 1099 only loans typically carry a rate premium of 0.50% to 1.25% above comparable conventional rates. The exact spread depends on your credit score, loan-to-value ratio, and the lender. For many contractors, the ability to qualify on gross rather than net income makes this premium worthwhile because it unlocks a higher purchase price or better debt-to-income ratio. See Non-QM down payment details →

Most 1099 programs require at least 12 months of 1099 documentation and 2 years of self-employment history. If you have been self-employed for 2 years but only have 12 months of 1099s (perhaps due to switching from W-2 to 1099 mid-year), some lenders will work with the available documentation. Your loan officer will assess whether the timeline meets program guidelines.

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The Application

Apply From Your Phone In Fifteen Minutes

If your income does not fit in a W-2 box, this is the path. The application runs on your phone and reaches me the minute you submit it.

Starts with a soft credit check, so your score is never touched
Bank statements, 1099s or assets, we tell you which one fits you
Upload documents with your phone camera, no scanner needed
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If the numbers say wait, I'll tell you that too, and then we make a plan to fix whatever is in the way.

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