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Unlocking Homeownership for the Self-Employed: A Guide to the 1099 Income Loan Program

Sal Ciubancan  7-MINUTE READ  April 16, 2024


Unlocking Homeownership for the Self-Employed: A Guide to the 1099 Income Loan Program

For many self-employed individuals, the dream of homeownership can feel out of reach. Traditional mortgages often require tax returns for income verification, which can be a challenge for those with fluctuating income. But fear not! The 1099 Income Loan Program offers a solution specifically designed for self-employed borrowers like you.


Unlike traditional mortgages, the 1099 Income Loan Program uses alternative methods to verify your income. Here's a breakdown of the process:

Eligibility Requirements:

  • Minimum Self-Employment History: You need to be working with the same employer for at least two years. This establishes a track record of consistent income.
  • Employer Covers Business Expenses: Your employer must cover all your business expenses. This ensures a clearer picture of your actual income.

Income Verification: There are two options for income verification, and lenders may offer one or both:

  1. 2-Year 1099 Average:
    • Provide your 1099 forms for the last two years with the same employer.
    • The total income from these forms is then divided by 24 months to get your average monthly income.
  2. Most Recent Year's 1099:
    • Provide your most recent 1099 form.
    • The income on this form is divided by 12 months to get your monthly income.

Additional Documentation:

In addition to 1099 forms, lenders may require:

  • Employer Verification Letter: A letter from your employer confirming your date of hire and that they cover all business expenses.
  • Bank Statements: Statements for the bank account where you deposit your self-employment income (YTD Bank Statements are preferred).

Loan Approval:

Once your income is verified and additional documents are reviewed, the lender will determine your eligibility for the loan program. If approved, the income figure calculated using either the 2-year average or most recent year's 1099 will be used to qualify you for your new home loan.


The 1099 Income Loan Program is a perfect fit for several types of self-employed individuals, regardless of how you file your Federal income taxes:

  • Workers receiving consistent 1099 wages: This includes employees classified as independent contractors or those working for a company that issues 1099 forms instead of W-2s.
  • Independent contractors: If you work for multiple clients but receive consistent income, you may be eligible.
  • Sole proprietors: As a sole proprietor, you own an unincorporated business. The 1099 Income Loan Program can help you achieve homeownership even if your business is not formally established.
  • Freelancers with consistent clients: If you freelance and have a consistent income stream from the same client(s), this program can be a great option.

Benefits of the 1099 Income Loan Program:

  • Alternative Income Verification: No need for tax returns! This program allows for income verification through alternative means.
  • Greater Flexibility: Loan terms and down payment requirements may be more flexible compared to traditional mortgages.
  • Faster Processing: Utilizing alternative income verification methods can potentially lead to faster loan approvals.


  • Maintain good financial records for a smoother documentation process.
  • Build a strong credit history to improve your chances of approval.

With the 1099 Income Loan Program, self-employed individuals can finally turn their dream of homeownership into a reality. By understanding the eligibility requirements, income verification process, and benefits of the program, you can confidently embark on your journey towards homeownership.

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