1099 loan vs. Conventional loan
For a 1099 contractor, the split is about which income figure the lender uses. A 1099 loan qualifies you on the gross income reported on your 1099 forms, minus a flat expense factor — no full tax returns, no line-by-line write-off deductions. A conventional loan uses the net income on your tax returns after every deduction, at the lowest available rate.
If you write off aggressively, your conventional qualifying income can be a fraction of what you actually earn. The 1099 loan is built to close that gap — for a higher rate.
Side by side
| Factor | 1099 loan | Conventional loan |
|---|---|---|
| Qualifying income | 1099 gross × (1 − expense factor) | Net profit from 2 years of tax returns, averaged |
| Tax returns required | No (1099s + often a P&L) | Yes (2 years) |
| Down payment | 10–20% typical | As low as 3–5% |
| Minimum credit | 620–660 (best pricing 700+) | 620+ |
| Rate vs. conventional | ~0.75–2% higher | Baseline (lowest) |
| Best when | Write-offs shrink your taxable net income | Net income is high enough to qualify |
Figures are representative ranges, not quotes, and vary by lender. Read the full guides: 1099 loan · Conventional loan.
Who should pick 1099 loan
Independent contractors and gig workers who receive 1099s and whose deductions leave their tax-return net income too low to qualify conventionally — the 1099 loan uses gross instead of net.
Who should pick conventional loan
1099 earners whose net income (after add-backs) still qualifies them, who want the lowest rate and smallest down payment and can document two years of returns.
Bottom line
Still deciding? Take the 5-question loan quiz, compare every option on the loan types page, or size a purchase with the affordability calculator.
FAQ
Both are non-QM programs that skip tax returns, but they measure income differently. A 1099 loan uses the gross on your 1099 forms minus an expense factor; a bank statement loan uses 12–24 months of deposits minus an expense factor. If most of your income arrives on 1099s, the 1099 loan is often simpler; if you're paid many ways, bank statements can capture more.
Most lenders want a two-year history in the same line of work, though some accept one year with strong compensating factors. The figures here are representative ranges, not quotes — requirements vary by lender.
Educational information only — not financial advice, and not a quote, pre-approval, or offer of credit. Mortgage Merlin is a publisher, not a lender or broker.