What is a 1099 Mortgage Loan?
A 1099 Mortgage Loan is designed specifically for self-employed individuals, independent contractors, freelancers, and gig workers who may not have traditional W-2 income documentation. Instead of relying on pay stubs or tax returns, 1099 mortgage programs use bank statements, profit-and-loss statements, or 1099 forms to verify income.
Why consider a 1099 Mortgage Loan?
Traditional mortgage qualification can be difficult for self-employed borrowers, but a 1099 mortgage provides flexibility to those with non-traditional income sources. Key benefits include:
No W-2s or pay stubs required – Qualify using 1099 forms, bank statements, or business financials.
Flexible income verification – Lenders assess average earnings rather than taxable income (which may be reduced by deductions).
Lower debt-to-income (DTI) requirements – Self-employed borrowers often qualify with a higher DTI ratio than conventional loans allow.
Competitive interest rates – While slightly higher than conventional loans, rates remain competitive compared to alternative financing.
Loan amounts up to jumbo limits – Borrowers can qualify for larger loan amounts without W-2s or traditional income proof.
A 1099 mortgage loan is a great solution for self-employed professionals, allowing them to secure home financing without the challenges of traditional income verification.
Key Features of 1099 Mortgages
- Low Down Payment: Less than 10% down payment required.
- Flexible Income Calculation: Tailored to accommodate varying income streams.
- Flexible Credit Score Requirements: Accepts credit scores as low as 620.
- Reserves: The required reserves depend on factors such as credit score, loan-to-value ratio (LTV), and loan amount.
Reserve Requirements:
- For loan amounts up to $1.5MM with a FICO score of 680 or higher: Max 90% LTV with 6 months of PITIA reserves.
- For loan amounts between $1.5MM and $3MM with a FICO score of 660 or higher: Max 75% LTV with 12 months of PITIA reserves.
- For loan amounts between $100,000 and $1.5MM with a FICO score of 700 or higher: Max 85% LTV with 3 months of PITIA reserves.
- For loan amounts between $100,000 and $1.5MM with a FICO score of 660 or higher: Max 80% LTV with 3 months of PITIA reserves.
- For loan amounts between $100,000 and $1.5MM with a FICO score of 620 or higher: Max 75% LTV with 3 months of PITIA reserves.
Additional Benefits
- Gift Funds: Funds from a family member are permissible, provided the borrower contributes at least 5% of the purchase price and reserves from their funds.
- Interested Party Contributions (IPCs): Up to 6% of the purchase price can be covered by credits from sellers, real estate agents, builders, etc. For investment properties, the maximum contribution is 2% of the purchase price.
- Occupancy Options: Eligible for owner-occupied, second/vacation homes, or investment properties.
- Eligible Home Types: Single-family homes, townhomes/villas, 2-4 unit multi-family residences, and condominiums (both warrantable and non-warrantable).
- 1099 Mortgages provide a valuable opportunity for self-employed individuals to secure financing tailored to their unique income situations, making homeownership more accessible without compromising on the quality or terms of the loan.
