You switched from a W-2 job to 1099 work doing essentially the same thing, maybe even for some of the same clients. Your income went up. Then every lender you called said the same thing: come back when you have two years of 1099s. That's a common answer, but it isn't the only one. A 1099 mortgage with one year history is possible with some non-QM lenders, especially when you stayed in the same line of work.
This guide explains how 1099 programs work, when one year may be enough, and what lenders want to see to feel confident your income will continue.
Key takeaways
- Conventional lenders typically want two years of self-employment history, but some non-QM 1099 programs consider one year.
- 1099 programs usually qualify you on the gross amount on your 1099 forms, minus a fixed expense factor, rather than your tax-return net income.
- Staying in the same field when you moved from W-2 to 1099 is one of the strongest supports for a shorter history.
- Lenders often verify year-to-date earnings and continuing work with recent payment records or statements.
- Non-QM pricing is typically higher than conventional, and requirements vary by lender.
Why lenders usually ask for two years
Two years is the standard benchmark for self-employment income in conventional lending. The idea is simple: a two-year track record shows that your income is stable and likely to continue. Lenders average two years of tax returns to smooth out fluctuations.
When you've only been a 1099 earner for one year, a conventional lender may not be able to use that income at all, or may need extra documentation to justify an exception. That's where many 1099 earners get stuck, and why our guide to self-employed mortgages with less than two years is one of our most-read articles.
How 1099 mortgage programs work
A 1099 loan is a non-QM program built specifically for independent contractors. Instead of qualifying you on the net income from your Schedule C after all your deductions, it starts with the gross compensation shown on your 1099 forms.
Here's the typical approach:
- The lender totals your 1099 income for the qualifying period, often one or two years depending on the program.
- A fixed expense factor is applied to account for business costs. Many lenders use a modest factor for 1099 earners, often somewhere around 10%, though it varies by lender.
- The result is averaged into a monthly qualifying income.
- Recent earnings are verified to confirm the income is continuing.
The big advantage is that your write-offs don't reduce your qualifying income the way they do with tax returns. If your Schedule C shows heavy deductions, a 1099 program may show significantly more income. For more background, see our complete 1099 mortgage guide.
Illustrative example — not an offer or a guarantee of qualifying income
Take a hypothetical medical sales rep who moved from W-2 to 1099 last year, selling the same product category.
- 1099 income for the most recent year: $140,000
- Schedule C net income after write-offs (vehicle, home office, travel, meals): $78,000
Tax-return approach: $78,000 ÷ 12 = about $6,500 per month, and a conventional lender may not use it at all with only one year of 1099 history.
1099 program approach: $140,000 minus a hypothetical 10% expense factor = $126,000. Divided by 12 = $10,500 per month in qualifying income.
Your numbers, and the factor a lender applies, will differ.
When one year of 1099 history may be enough
Lenders considering a single year of 1099 income generally want evidence that the income is stable and likely to continue. The strongest files share a few traits.
You stayed in the same field
This is the big one. If you were a W-2 software engineer and now you're a 1099 software engineer, or a W-2 nurse who became a 1099 travel nurse, the lender can see that your skills and earning ability carried over. Your W-2 history in the same field effectively extends your track record.
Some examples that often fit this pattern:
- Real estate agents who moved brokerages or switched from salaried roles. See our guide on mortgages for real estate agents.
- Salespeople who moved from salaried to commission-only 1099 roles
- Nurses, therapists, and physicians who went per-diem or locum
- IT, engineering, and creative professionals who became independent contractors
- Company truck drivers who became leased-on owner-operators
Your income is consistent or growing
A year of steady 1099 earnings, ideally at or above your prior W-2 income, makes the strongest case. A sharp drop after switching can raise questions.
You have continuing work
Lenders want to know the income isn't a one-time contract that just ended. An ongoing contract, a long-term relationship with a client or platform, or a steady pipeline helps.
Been told to wait two years? Let us check whether a 1099 program could work for you now. See if you qualify →
What if you have both W-2 and 1099 income?
Many borrowers have a mix: a W-2 job plus side 1099 work, or a W-2 for part of the year before switching to 1099. Lenders can often combine the two, but each income type has its own documentation and history rules.
If you switched partway through a year, you may have a W-2 and a 1099 from the same tax year. That's common and workable. Our guide to W-2 and 1099 income for a mortgage covers how lenders blend them.
How lenders verify year-to-date income and continuity
Because 1099 forms only arrive once a year, lenders typically want proof that you're still earning. Common documentation includes:
- Year-to-date payment records from the companies that pay you
- Recent bank statements showing ongoing deposits
- A written verification or letter from a client or company confirming the relationship continues
- Contracts showing ongoing work, where available
- A CPA or tax-preparer letter confirming self-employment in some cases
Some lenders also ask for a signed IRS form so they can confirm your 1099 income with the IRS.
Document checklist for a 1099 mortgage
- 1099 forms for each year used (one or two, depending on program)
- Year-to-date earnings statements or payment records
- Recent bank statements, usually a couple of months
- Prior W-2s and pay records if you recently switched from W-2 in the same field
- Resume or written explanation of your work history, if requested
- Contract or client letter showing continuing work, if available
- Government ID and asset statements for down payment and reserves
1099 programs vs bank statement programs
Some 1099 earners also qualify for a bank statement loan, and it's worth comparing the two before you apply.
A 1099 program starts with the gross compensation on your 1099 forms. It tends to work best when most of your income comes from a few companies that issue you 1099s, and when those amounts are clean and easy to verify.
A bank statement program starts with deposits into your accounts. It can work better when you have many smaller clients, some of whom don't issue 1099s, or when you've formed an LLC and your revenue flows through a business account. It typically uses a larger expense factor for business statements, though personal statement programs are treated differently.
Here's a quick way to think about it:
- Mostly 1099 income from a handful of payers? A 1099 program is often the simpler fit.
- Lots of clients, card payments, or mixed revenue sources? A bank statement program may capture more of your income.
- Very low business expenses? Compare both, because the expense factor each lender applies can change the result significantly.
A broker who works with both types of lenders can run the numbers side by side so you're not guessing.
The trade-offs to know about
1099 programs solve a real problem, but they come with trade-offs:
- Pricing is typically higher than conventional, because these loans are non-QM and funded by private investors rather than Fannie Mae or Freddie Mac.
- Down payment requirements are usually larger than many conventional loans.
- Reserves are commonly required, often more with larger loans.
- Fewer lenders offer one-year 1099 options than two-year options, so guidelines vary more.
If you'll have two years of 1099 history soon and your tax returns would qualify you conventionally, waiting might save money. If you need to move now, or your write-offs reduce your income too much regardless, a 1099 program may be the better path. Not everyone qualifies, and the right answer depends on your full profile.
Frequently asked questions
Q: Do I need two years of 1099s to get a mortgage?
A: Not always. Many conventional lenders want two years, but some non-QM 1099 programs consider one year of 1099 income, especially if you were previously a W-2 employee in the same field. Requirements vary by lender.
Q: Can I get a mortgage right after switching from W-2 to 1099?
A: It may be possible, but most lenders want some history of 1099 earnings. If you stayed in the same field and your income is steady, some lenders may consider a shorter 1099 history. A broker can tell you which lenders are most flexible.
Q: How do lenders calculate 1099 income for a 1099 loan?
A: Many 1099 programs start with the gross amount on your 1099 forms and apply a fixed expense factor, rather than using your Schedule C net income. The result is averaged into a monthly figure. Factors and methods vary by lender.
Q: Will my write-offs still hurt me on a 1099 loan?
A: Generally not the way they do on a tax-return-based loan. Because 1099 programs typically use gross 1099 income minus a standard expense factor, your Schedule C deductions usually don't reduce qualifying income. Talk to your CPA about tax planning.
Q: What if I have multiple 1099s from different clients?
A: That's common. Lenders typically total all qualifying 1099 income and may verify that each relationship is ongoing. Consistent income across several clients can actually strengthen your file.
Don't let the two-year rule stop you
The two-year rule is a common guideline, not a universal law. If you've built a strong first year as a 1099 earner, especially in the same field you've always worked in, there may be options available now.
At Matador Lending, we compare 1099 programs across 150+ wholesale lenders to find the ones whose guidelines fit your history. We'll be honest if waiting makes more sense.
See if you qualify → — no credit pull to check your options. Prefer to talk? Call or text 713-366-4668.
This article is general education, not tax, legal, or financial advice, and not a commitment to lend. Loan programs, guidelines, and availability vary by lender and state and change without notice. Non-QM loans are subject to credit approval, income and asset verification, and appraisal. Talk with your CPA about tax questions. Small Business Mortgages is a marketing brand of Matador Lending, NMLS #2072896. Equal Housing Opportunity.