Traditional mortgage underwriting looks at your tax returns and uses adjusted gross income or net profit from Schedule C. If you're a 1099 contractor who writes off mileage, home office, equipment, and meals, your net income on paper can be a fraction of what you actually deposit. That's great for taxes but terrible for mortgage qualification.
How 1099-only programs work
Non-QM lenders offer programs that qualify you on gross contractor income instead of net. The underwriter reviews twelve or twenty-four months of 1099 forms (or bank deposits), totals the gross receipts, then applies a standard expense factor—typically 10 to 30 percent depending on the industry and program. The result is your qualifying income.
For example, if you earned 120,000 dollars gross last year and the lender uses a 20 percent expense factor, your qualifying income would be 96,000 dollars. That's almost always higher than the net you reported to the IRS after maximizing write-offs. These figures are illustrative; rates and products are subject to change and this is not a commitment to lend.
Who benefits
- · **Gig and platform workers**: Uber, Lyft, DoorDash, TaskRabbit, Upwork contractors whose 1099-K or 1099-NEC shows strong gross revenue.
- · **Commission-only sales reps**: Real-estate agents, insurance brokers, financial advisors who claim large business-use deductions.
- · **Independent tradespeople**: Electricians, plumbers, landscapers operating as sole proprietors with heavy equipment depreciation.
- · **Fractional executives and consultants**: High earners who structure compensation as 1099 and take aggressive deductions.
You typically need at least twelve months of steady 1099 income in the same line of work, though some programs accept six months for higher down payments.
Documentation requirements
Expect to provide:
- · Two years of personal 1099 forms (all variants: NEC, MISC, K).
- · Twelve to twenty-four months of business bank statements showing deposits.
- · A year-to-date profit-and-loss statement if applying mid-year.
- · Personal tax returns (to verify you filed, even though net income isn't the qualifier).
- · A CPA letter confirming self-employment status, if the lender requests it.
Consult a CPA or attorney; this is not tax or legal advice.
Some lenders will blend W-2 income with 1099 gross if you have both. Credit score and down-payment requirements are usually higher than conforming loans—expect a 640 minimum score and 10 to 20 percent down, though terms vary by lender and loan size.
The Alliance take
If your tax strategy prioritizes minimizing liability over maximizing reported income, a 1099-only program can unlock homeownership without forcing you to change how you file. The trade-off is a slightly higher rate and stricter reserves, but for many contractors the ability to qualify at all makes it worthwhile. Ready to see what you qualify for? Start an application and we'll walk through the documentation together.