1099 Mortgage in NJ: How Independent Contractors Get Approved
By Sam Alpert, President and Mortgage Loan Originator, NMLS #1961555
A 1099 mortgage qualifies you on your 1099 income with an expense factor applied, not your tax return. Here is how the math works, what you need, and who it fits.
A 1099 mortgage qualifies you using the income reported on your 1099 forms, with a fixed expense factor applied, instead of the net income on your tax return. For an independent contractor with real business expenses, that usually produces a higher qualifying income than a conventional loan would.
You do not need to own a business. You need to be paid on a 1099.
Who is a 1099 mortgage for?
Real estate agents. Insurance agents. Truck drivers. Contractors and trades. Consultants. Sales reps on commission. Gig workers with consistent 1099 income. Anyone who receives a 1099 instead of a W-2 and takes deductions against it.
The pattern is always the same. Your 1099s show one number. Your tax return shows a much smaller number after expenses. A conventional lender only ever sees the second one.
If your 1099s total $200,000 and your return shows $90,000 after write-offs, conventional underwriting works off $90,000. A 1099 program works off something much closer to the $200,000.
How does the math work on a 1099 loan?
The lender takes your gross 1099 income and applies an expense factor, commonly somewhere in the range of 10% to 25% depending on the program and your profession. What is left is your qualifying income.
Some lenders use one year of 1099s. Some require two. One-year programs generally come with stricter credit or down payment requirements, because the lender has less history to look at.
The exact factor and the exact documentation vary lender to lender, and that variation is the whole reason to run this through a broker. We are not locked into one guideline set.
What documents do you need for a 1099 mortgage?
• One or two years of 1099 forms
• Recent bank statements, usually two months
• A government-issued photo ID
• Sometimes a year-to-date income statement from whoever pays you
Notably absent from that list: tax returns. Most 1099 programs do not ask for them.
That matters if you are newly on 1099 income, if your returns are on extension, or if the returns simply do not reflect what you earn.
What credit score and down payment do you need?
Expect the credit floor to sit somewhere around 620 to 660 depending on the program. Down payment requirements generally start in the 10% to 20% range. Stronger credit and more money down open up better pricing.
These are Non-QM loans. They price differently than conventional, and that is the trade you are making for an approval based on what you actually earn rather than what is left after deductions.
1099 loan or bank statement loan: which one?
If your income arrives as 1099s, a 1099 program is usually simpler and often produces a higher qualifying income than a bank statement program. There is no averaging of deposits and no argument about which deposits count.
If money comes into a business account from many sources and your 1099s do not capture all of it, a bank statement program is usually the better fit.
We run both and show you the difference before you pick one.
Why do write-offs cause this problem in the first place?
Because the number that lowers your tax bill is the same number your lender uses to decide what you qualify for. Your accountant did their job correctly. The consequence just shows up later, at the mortgage application.
Can you refinance out of a 1099 loan later?
Often, yes. If your tax returns strengthen over the next couple of years, or your credit improves, a conventional refinance may become available. Nothing about a 1099 loan locks you into it permanently.
That is worth saying out loud, because people treat Non-QM as a life sentence. It is usually a bridge.
Where we lend
New Jersey, Pennsylvania and Texas.
Send us your 1099s and we will tell you what the number looks like under a 1099 program and under conventional guidelines, and you decide.
Spring Home Company, independent mortgage broker. 1815 Lakewood Rd, Ste 236, Toms River, NJ 08755. 732-908-8040. Licensed in New Jersey, Pennsylvania and Texas. NMLS #2741914. Sam Alpert, President and Mortgage Loan Originator, NMLS #1961555. Equal Housing Lender.
Informational only. Not a commitment to lend or a rate quote. All loans subject to credit approval and underwriting guidelines. Program terms, expense factors, credit requirements and down payment requirements are set by individual lenders and change without notice.