How to Buy a House With a 1099?

Written by Banks Editorial Team
3 min. read
Written by Banks Editorial Team
3 min. read

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If you’re an independent contractor in the market for a new home, you may find it challenging to qualify for a traditional mortgage. This is especially true if you take write-offs at tax time since most loan programs only consider your net income when determining if you’re a good fit for a mortgage. 

Still, it’s possible to get the financing you need without having to jump through hoops. Furthermore, there are specialized home loan products available to 1099 workers

Self Employed Mortgage Loans
Use 1099 forms to get a Mortgage Loan. No tax returns required for self employed. Loan amounts from $150,000 to $3 million. Use this loan to purchase or refinance a home.

Can You Buy a House with Your 1099?

Yes, it’s possible to qualify for a home loan using 1099 earnings statements in place of income tax returns if you’ve been employed as a contractor for the past two years. 

Who are Considered 1099 Workers When Buying a House?

A 1099 worker is not classified as an employee but completes assignments or jobs for an employer. Self-employed individuals, freelancers, independent contractors, consultants and gig workers are all considered 1099 workers. 

How Hard Is It to Get a Mortgage with 1099 Proof of Income?

You may find it to be a bit more difficult to get a mortgage with a 1099. However, you can connect with a lender and get pre-qualified to learn more about the eligibility requirements and gauge your approval odds. 

What Documents Will You Need to Provide as a 1099 Worker When Buying a House?

Before applying for a mortgage, gather the following documents to avoid processing delays: 

  • 1099 forms for the past two years 
  • Tax returns for the past two years (including Schedule, Schedule SE and all other applicable forms) 
  • A copy of your business license (if applicable)
  • Business financial statements (including the balance sheet and profit and loss statement)
  • Bank statements for the past three months 
  • Gift letter if you’re receiving a monetary donation from a relative or friend for the down payment 
  • Any other income documentation (i.e., paystubs and W-2 forms if you’re employed elsewhere)

How to Qualify for a Mortgage with a 1099

Not all mortgage lenders are the same, and each has its own set of qualification criteria. However, these tips could help boost your chances of qualifying for a home loan with competitive terms. 

Reduce Your Debt-To-Income Ratio

Your debt-to-income (DTI) ratio constitutes the amount of your monthly income that’s allocated to monthly debt payments. Ideally, this figure should be no more than 45 percent, although some lenders have higher allowable DTI limits. Consider paying down your debts before applying if your DTI is on the higher end. 

Improve Your Credit Score

Your credit score is typically utilized by lenders to determine what interest rate to offer you on a home loan. So even if you meet the required minimum credit score criteria, it’s best to work towards improving your credit health to qualify for better loan terms and potentially save thousands in interest over the life of the loan. 

Self Employed Mortgage Loans
Use 1099 forms to get a Mortgage Loan. No tax returns required for self employed. Loan amounts from $150,000 to $3 million. Use this loan to purchase or refinance a home.

Use an Alternative Mortgage Lender

Non-traditional lenders, like Angel Oak Home Loans, feature mortgages designed exclusively for contractors, freelancers, self-employed borrowers and gig economy workers. The 1099 Income Loan is one option worth considering. 

You can use 1099 statements from the past one or two years or bank statements instead of tax returns to get a mortgage between $150,000 and $3 million. Here’s what else you should know about 1099 Income Loans: 

  • You will need a minimum credit score of 680 or higher to qualify. 
  • The maximum allowable loan-to-value (LTV) is 85 percent. 
  • Your 1099 statements should be from the same employer for the past two years. 
  • The loan can be used to purchase or refinance an owner-occupied property, non-owner-occupied property or second home. 
  • If you have a recent bankruptcy, short sales, foreclosure or deed-in-lieu, there’s a mandatory seasoning (or waiting) period of two years. 

If you’re interested in learning more about 1099 Income Loans or retrieving a quote, complete this simple online form to connect with a member of the Angel Oak Home Loans team. 

You may find that another loan product, like a Bank Statement Home Loan, is a better fit. It also caters to self-employed borrowers and features loan amounts between $150,000 and $3 million. But instead of only being able to use 1099 statements, your bank statements can also be submitted to determine your eligibility for a mortgage. Below is an overview of Angel Oak Home Loans’ eligibility criteria for this offering:

  • You’ll need at least two years of self-employment experience. 
  • Be prepared to submit 12 or 24 months of personal or business bank statements.
  • You can use the loan proceeds to buy or refinance a single-family home, condo or townhome that will be used as a primary home, second home or investment property. 
  • There’s a waiting period of two years for borrowers with bankruptcies, deeds-in-lieu, foreclosures and short sales. 

You can also inquire about the Bank Statement Home Loan when you connect with a loan officer. 

Save for a Higher Down Payment

There are a few key benefits of making a higher down payment. For starters, you’ll reduce the monthly payment amount and save on interest over the loan term. A higher down payment also means you could qualify for better loan terms and possibly avoid private mortgage insurance, depending on how much you put down. 

Keep Your Personal and Business Expenses Separate

It’s never a good idea to mix personal and business finance. In fact, commingling the two is frowned upon by lenders, so you want to keep these affairs separate. 

Try to Get a Co-Signer

A co-signer with a consistent stream of verifiable income and a strong credit profile can help improve your chances of qualifying for a home loan as a 1099 worker. However, keep in mind that they’ll share responsibility for the mortgage, which can be problematic in the unlikely event that you default on the loan payments. 

Self Employed Mortgage Loans
Use 1099 forms to get a Mortgage Loan. No tax returns required for self employed. Loan amounts from $150,000 to $3 million. Use this loan to purchase or refinance a home.

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