What a 1099 tells a lender
A W-2 worker has an employer who takes out taxes from each check. A 1099 worker is paid in full and handles their own taxes. The company that paid you sends a form, often a 1099-NEC, that shows how much it paid you for the year.
To a lender, that usually means you are self-employed, even if you work for just one company. So the lender wants to see what you earned after your costs, not just what came in. Your gas, gear, travel, and other write-offs lower that number.
The two-year rule, and when one year may work
For most standard loans, lenders like to see about two years of steady self-employed income. They often ask for your last two years of signed tax returns, or the IRS transcripts of them.
Some standard loans can work with one year of returns. For that, the newest tax return should show a full 12 months of this work. The lender will also want proof that you earned the same or more in the same kind of job before. Think of a hospital nurse who went from staff to contract work, or a crew lead who started taking jobs on their own.
Loans that look at the 1099s themselves
What if your tax returns show low income because of big write-offs? Some non-QM loans may help. These loans sit outside the federal rules for a “qualified mortgage,” so each lender sets its own terms.
Some of these programs look at the 1099 forms instead of the tax return. The lender may take the total on your 1099s and cut it by a set amount to stand in for costs. Others look at bank deposits or a profit and loss report. These paths often call for a bigger down payment and more cash saved. The cost to borrow is often higher too, since the lender takes on more risk.
Papers a 1099 buyer should gather
Having these ready can save a week or more once you find a home.
- Tax returns. The last two years, signed, with every schedule. That includes Schedule C if you file one.
- All your 1099 forms. Every form from every payer for the same years.
- Bank statements. Recent months for each account you use, personal and business.
- Proof of the work. A contract, a recent pay stub from a staffing agency, a business license, or a letter from your tax pro.
- Year-to-date numbers. If it is late in the year, the lender may want to see how this year is going.
Nashville work that often pays on a 1099
Music City has a big contract economy. Here are a few common cases and what tends to come up.
- Travel and contract nurses. Pay may mix a taxable wage with travel money that is not taxed. Only some of that may count as income. Gaps between jobs can raise questions, so a clear work record helps.
- Session players, writers, and tour crew. Income can swing from month to month. Lenders look at the whole year, so a slow spring is not always a problem. Royalties may count if they are steady and likely to keep coming.
- Contractors and trades. Builders and remodelers in Williamson County often have high costs for tools and trucks. That lowers taxable income, which is why some look at other loan types.
- Gig drivers and delivery. Mileage write-offs can cut income on paper a lot. Most of the time, this pay works best as a second source on top of a main job.
Tips for agents working with 1099 buyers
- Start with a loan officer. Before the first showing in Spring Hill or East Nashville, have the buyer talk with a loan officer. That talk shows which loan fits and what price range makes sense.
- Ask about write-offs early. A simple question like “Does your tax pro take a lot of deductions for you?” can head off a surprise later.
- Watch the tax calendar. In the first months of the year, a buyer may need to file the newest return before applying. A tax extension can slow things down.
- Keep jobs steady. Remind the buyer not to drop a contract, switch fields, or take a long break while the loan is in process.
- Leave room in the dates. Self-employed files can take longer to review. Set loan and closing dates with a little cushion.
Common questions
Can I get a mortgage if I am paid on a 1099?
Yes, many 1099 workers buy homes. Lenders usually treat 1099 pay as self-employed income and look at your tax returns. Some non-QM programs look at the 1099 forms or bank deposits instead.
How long do I need to be on a 1099 to qualify?
Standard loans often look for about two years. Some allow one full year of self-employment on your newest tax return, as long as your past jobs were in the same line of work. Rules vary by loan type and lender.
Do write-offs hurt my chances?
They can. Write-offs lower the income a lender counts on a tax return. If that is a problem, a loan officer can show you other loan types and what each one costs.
Have a 1099 buyer?
Reach out through our contact page and we will connect you with a Heathrow Mortgage loan originator. You can also start an application online.