Sarah Mitchell
VA Loan & First-Time Buyer Specialist • NMLS #123456 • February 15, 2026
How to Get a Mortgage with 1099 Income in 2026: The Complete Guide for Freelancers & Gig Workers
Over 70 million Americans now earn 1099 income — from Uber drivers and DoorDash couriers to freelance designers and consulting professionals. Yet the mortgage industry still treats W-2 employees as the default. If you're self-employed or earn gig income, getting a mortgage feels harder than it should be. This guide shows you exactly how to get approved, which loan types work best, and how to maximize your qualifying income.
Quick Answer
1099 workers can get mortgages through three main paths: (1) Traditional loans using 2 years of tax returns, (2) Bank statement loans using 12-24 months of deposits (no tax returns needed), or (3) Asset depletion loans for those with significant savings. Bank statement loans are often the best option because they use gross deposits rather than net taxable income, qualifying you for 30-50% more than traditional loans.
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In This Guide
Why 1099 Income Makes Mortgages Harder
The core problem is simple: the IRS rewards you for minimizing taxable income, but lenders reward you for maximizing it. As a 1099 worker, you're incentivized to deduct every possible business expense — home office, vehicle, equipment, supplies, meals. These deductions save you thousands in taxes but reduce the income lenders see on your tax returns.
Example: A freelance graphic designer earns $120,000 in gross revenue. After deducting $35,000 in business expenses (software, equipment, home office, health insurance), their Schedule C shows $85,000 in net income. A traditional lender uses that $85,000 figure. But a W-2 employee earning $120,000 qualifies based on the full amount. The freelancer has 29% less qualifying income despite earning the same gross amount.
This is why bank statement loans were created — to bridge this gap by looking at actual cash flow rather than tax return income.
Three Paths to Mortgage Approval
| Loan Type | Income Verification | Down Payment | Rates | Best For |
|---|---|---|---|---|
| Traditional (FHA/Conv/VA) | 2 years tax returns | 3.5-5% | 6.0-7.0% | Low deductions, stable income |
| Bank Statement Loan | 12-24 months statements | 10-20% | 7.0-8.5% | High deductions, strong cash flow |
| Asset Depletion | Liquid assets | 20-30% | 7.5-9.0% | Large savings, irregular income |
| 1099-Only Loan | 1-2 years of 1099 forms | 10-15% | 7.0-8.0% | Consistent 1099 from same source |
Bank Statement Loans Explained
Bank statement loans are the game-changer for 1099 workers. Instead of tax returns, the lender reviews 12-24 months of your personal or business bank statements and calculates your income based on average monthly deposits.
How Income Is Calculated
Bank Statement Income Calculation
Total deposits over 12 months: $144,000
Average monthly deposits: $12,000
Expense factor (service business): 50%
Qualifying monthly income: $12,000 x 50% = $6,000/month
Annual qualifying income: $72,000
Compare to tax return income: $85,000 net (after deductions)
Compare to traditional qualifying: $85,000 / 12 = $7,083/month
In this case, tax returns actually qualify you for MORE.
But if your deductions are heavy ($50K+), bank statements win.
Expense Factors by Business Type
| Business Type | Typical Expense Factor | Income Used |
|---|---|---|
| Consulting/Freelance Services | 50% | 50% of deposits |
| Rideshare/Delivery (Uber, DoorDash) | 60-70% | 30-40% of deposits |
| E-commerce/Retail | 65-75% | 25-35% of deposits |
| Real Estate Agent | 40-50% | 50-60% of deposits |
| Medical/Legal Professional | 40-50% | 50-60% of deposits |
| Construction/Trades | 55-65% | 35-45% of deposits |
Bank Statement Loan Requirements
- Credit score: 620-680+ (varies by lender)
- Down payment: 10-20% (some lenders offer 10% with higher rates)
- Reserves: 6-12 months of mortgage payments in savings
- Self-employment history: 2+ years (some accept 1 year with strong profile)
- Bank statements: 12 or 24 months, personal or business account
- Business license or CPA letter: Proof of self-employment
Tax Return Strategy: The 2-Year Rule
If you plan to use traditional financing (FHA, conventional, VA), lenders average your net self-employment income over the most recent 2 tax years. Here's the critical detail: your income must be stable or increasing. If it declined year-over-year, lenders use the lower year.
Good: Increasing Income
- • Year 1 net income: $70,000
- • Year 2 net income: $90,000
- • Qualifying income: $80,000 (average)
- • Lender sees stable, growing business
Problem: Declining Income
- • Year 1 net income: $90,000
- • Year 2 net income: $65,000
- • Qualifying income: $65,000 (lower year)
- • Lender sees declining business — red flag
Planning Ahead
If you're planning to buy a home in the next 1-2 years, consider reducing your business deductions slightly to show higher net income on your tax returns. The extra taxes you pay may be worth it if it qualifies you for a better mortgage. Consult with a CPA who understands mortgage qualification.
How to Boost Your Qualifying Income
- Add back depreciation and depletion: Lenders add back non-cash deductions like depreciation to your net income. If you claimed $8,000 in depreciation on equipment, that gets added back to your qualifying income.
- Reduce discretionary deductions 1-2 years before buying: Home office deduction, vehicle mileage, meals — these are legitimate but optional. Reducing them temporarily increases your taxable income and qualifying power.
- Separate personal and business accounts: Clean bank statements with clear business deposits make bank statement loans easier. Transfers between accounts can be flagged and excluded.
- Document all income sources: If you have multiple 1099 clients, a part-time W-2 job, or rental income, document everything. Lenders can combine multiple income sources.
- Get a CPA letter: A letter from your CPA confirming your self-employment status, business type, and income trajectory strengthens your application significantly.
- Pay down debt before applying: Reducing your monthly debt payments (credit cards, car loans, student loans) directly improves your DTI ratio and buying power.
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Specific Guidance by Gig Type
Rideshare & Delivery (Uber, Lyft, DoorDash, Instacart)
High gross income but high expenses (vehicle, gas, maintenance). Bank statement loans work well because they capture your gross earnings. Traditional loans are tougher because mileage deductions significantly reduce net income.
Tip: Keep a separate bank account for gig income. Lenders want to see consistent deposits without personal transfers mixed in.
Freelance Professionals (Designers, Writers, Developers)
Generally the easiest 1099 workers to qualify. Lower expense ratios (mostly software and equipment), higher net margins, and often consistent monthly income from retainer clients.
Tip: If you have 2-3 anchor clients providing steady income, document those relationships. Lenders view recurring client contracts similarly to employment stability.
Real Estate Agents & Insurance Agents
Commission-based income is well-understood by lenders. You'll need 2 years of 1099s from your brokerage. Income can be volatile, so lenders average it. Bank statement loans are popular in this niche.
Tip: If you had one exceptional year and one average year, the average helps you. If income is declining, consider waiting until you have two strong years.
Content Creators & Influencers
Multiple income streams (sponsorships, ad revenue, merchandise, courses) can be combined. Document each source with 1099s, PayPal/Stripe statements, and platform analytics.
Tip: Lenders may not understand "influencer" as a profession. Frame it as "digital media business" or "marketing consultant" with supporting documentation.
Mixed Income (W-2 + 1099)
If you have a part-time W-2 job plus 1099 income, lenders can combine both. The W-2 income is straightforward; the 1099 portion follows the rules above. This is often the easiest path for gig workers.
Tip: Even a small W-2 income ($20,000-$30,000) provides stability that lenders love. If you can maintain a part-time position while freelancing, it significantly helps your application.
6 Mistakes 1099 Workers Make When Applying for a Mortgage
1. Maximizing Tax Deductions the Year Before Buying
Your CPA wants to minimize your taxes. Your lender wants to maximize your income. These goals conflict. If you're buying within 12 months, talk to your CPA about strategically reducing deductions.
2. Mixing Personal and Business Bank Accounts
For bank statement loans, lenders need to identify business income clearly. Personal transfers, loans from friends, and non-income deposits get excluded. Keep separate accounts.
3. Not Having 2 Years of Self-Employment History
Most lenders require 2 years of self-employment. If you just started freelancing 6 months ago, you'll likely need to wait. Some bank statement lenders accept 1 year with compensating factors (high credit score, large down payment).
4. Only Applying with One Lender
Different lenders calculate 1099 income differently. One lender might qualify you for $250,000 while another qualifies you for $350,000 using the same documentation. Always get 3-5 quotes.
5. Not Knowing About Bank Statement Loans
Many 1099 workers don't realize bank statement loans exist. They get denied by traditional lenders and give up. Bank statement loans are specifically designed for self-employed borrowers and can qualify you for significantly more.
6. Large Cash Deposits Before Applying
Unexplained large deposits in the 2-3 months before applying raise red flags. If you receive a large payment, keep documentation (invoice, contract, 1099) readily available. Lenders will ask about any deposit over 50% of your monthly income.
Your 12-Month Preparation Timeline
Separate Business & Personal Accounts
Open a dedicated business checking account. Route all 1099 income through it. This creates clean bank statements for your loan application.
Consult Your CPA About Tax Strategy
Discuss reducing discretionary deductions for the current tax year. Calculate the trade-off between tax savings and mortgage qualification.
Check & Improve Your Credit
Pull your credit reports. Dispute errors. Pay down credit card balances below 30% utilization. Every point matters for your rate.
Save for Down Payment & Reserves
Bank statement loans typically require 10-20% down plus 6-12 months reserves. Start building your savings aggressively.
Get Pre-Approved with Multiple Lenders
Apply with 3-5 lenders: at least one traditional and at least one bank statement lender. Compare qualifying amounts and rates.
Gather Documentation & Start Shopping
Prepare: 24 months bank statements, 2 years tax returns, business license, CPA letter, profit & loss statement. Start house hunting.
Frequently Asked Questions
Can I get a mortgage with 1099 income?
Yes. Freelancers, gig workers, and independent contractors can get mortgages through traditional loans (using 2 years of tax returns), bank statement loans (using 12-24 months of deposits), or asset-based loans. The key is documenting consistent income over at least 2 years.
What is a bank statement loan?
A bank statement loan uses 12-24 months of personal or business bank statements instead of tax returns to verify income. Lenders calculate your income by averaging your monthly deposits and applying an expense factor. This is ideal for self-employed borrowers who take significant tax deductions.
Do mortgage lenders use gross or net income for 1099 workers?
Traditional lenders use net income from tax returns. Bank statement lenders use gross deposits with an expense factor (typically 30-60% depending on business type). This is why bank statement loans often qualify 1099 workers for 30-50% more than traditional loans.
How long do I need to be self-employed to get a mortgage?
Most lenders require 2 years of self-employment history. Some bank statement lenders accept 1 year with compensating factors like a high credit score (720+), large down payment (20%+), or significant reserves. If you recently transitioned from W-2 to 1099 in the same field, some lenders count your prior W-2 experience.
Can I combine W-2 and 1099 income for a mortgage?
Yes. If you have both W-2 employment and 1099 income, lenders can combine both for qualification. The W-2 income is straightforward; the 1099 portion requires 2 years of history. This mixed-income approach often provides the best qualification outcome.
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