Home loans for self-employed and 1099 income borrowers

August 23, 2021

If you are paid with 1099 income or are self-employed and don’t qualify for a conventional, FHA or VA loan, there are other options. There are loan products targeted specifically for those outside the ranks of normal, everyday W-2 income earners.

For borrowers who are paid with commissions or as an independent contractor receive 1099s for each year, 1099 loan products can be used for primary, vacation or investment homes. The minimum loan amount is $100,000. Gift funds are allowed once the borrower contributes 5 percent of the purchase price. Sellers can help with closing costs up to 3 percent.

The income will need to be documented for a two-year period but may still qualify if the borrower changed from W-2 income to 1099 income during the last 24 months if in a similar type of work.

Some examples of what this loan can be used for: Primary home purchase, 90 percent loan to value, up to 50 percent debt to income and a credit score of at least 680.

Self-employed borrowers can qualify for loans the same as W-2 earners in regard to loan to value, debt to income ratio and credit scores. The only difference is in calculating the income. The allowable income on a Schedule C is the net profit plus depreciation, business use of home, and some mileage.

Self-employed borrowers using bank statements can base loans using the deposits on bank statements over the last 12 or 24 months, personal or business. One of the borrowers must earn the primary income through self-employment, and that borrower must own 25 percent or more of the business.

Gift funds are allowed once the borrower puts 5 percent into the transaction. Sellers can contribute up to 3 percent of the purchase price toward the borrower’s closing costs.

Examples of how this loan can be used: Primary home purchase, 90 percent loan to value, up to 50 percent debt to income ratio, and a credit score of at least 660. Primary rate/term refinance, 85 percent loan to value, and minimum credit score of 660. Vacation or investment home purchase and rate term refinance, 80 percent loan to value, 50 percent debt to income, and minimum 680 credit score.

JoAnn Moore is a licensed mortgage originator, NMLS #165477, for The Mortgage Market of Delaware LLC, Georgetown. For more information, call 302-855-1306 or 302-236-1229, or email

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