What is the biggest advantage of a 1099 loan?

You qualify on 90 to 100 percent of your gross 1099 income instead of your net after deductions, and the documentation is the lightest of any self-employed loan — just your 1099s and a year-to-date profit and loss statement, no tax returns.

What is the biggest drawback?

It is non-QM, so the down payment runs higher, often 10 to 15 percent, and rates are about 1 to 2 percent above conventional. It also requires clean 1099s from steady payers to work well.

Is a 1099 loan cheaper than a bank statement loan?

Pricing is similar, in the non-QM range, though a 1099 loan can require slightly more down in some cases. The bigger difference is documentation: a 1099 loan uses your forms, while a bank statement loan analyzes 12 to 24 months of deposits.

Will my write-offs hurt me?

No. That is the point of the program. Because the lender uses your gross 1099 income rather than net, the deductions that lower your tax bill do not reduce your qualifying income.

Can I refinance later?

Yes. Many borrowers use a 1099 loan to buy now and refinance into conventional once they have two years of filed self-employment returns, so it can be an efficient bridge.

1099 Loan Pros and Cons: Is It Worth It?

1099 Loan Pros and Cons in California

A 1099 loan is the simplest self-employed mortgage there is — you qualify on your gross income with just a couple of forms, no tax returns and no stack of bank statements. The trade is a bigger down payment, a modestly higher rate, and one requirement: your 1099s need to be clean. Here's the honest picture.

MBReviewed by Mike Basti, Mortgage Broker & Founder · NMLS #377740

Quick Answer

Pros: qualify on gross income (no 30–50% net haircut), lightest docs of any self-employed loan, no tax returns, covers the post-W-2 gap, refinance later. Cons: higher down (10–15%), non-QM pricing (~1–2% over conventional), needs clean 1099s from steady payers. Best for contractors paid by a few payers.

The pros

✓ Advantages

Gross income — 90–100%, no net haircut
Lightest docs — 1099s + YTD P&L, not 12–24 statements
No tax returns — write-offs don't hurt you
Covers the gap — right after leaving a W-2 job
Fast & clean — the forms tell the story
Refinance later — into conventional as returns build

The cons

✗ Drawbacks

Higher down payment — 10–15%
Non-QM pricing — ~1–2% over conventional
Needs clean 1099s — from steady payers
Not for W-2 earners
History — usually ~2 years
Fewer lenders — specialty product

The one thing that decides a 1099 loan: whether your 1099s are clean. The whole elegance of this program is that the forms themselves are the income documentation — no averaging tax returns, no dissecting a year of deposits. That's a huge advantage when your 1099s are tidy: a few steady payers, consistent amounts, matching a clear year-to-date P&L. But it's also the pivot point. If your income is scattered across many small payers, arrives partly as cash, or your 1099s meaningfully understate what actually hit your account, the clean-forms advantage disappears — and a bank statement loan, which counts every deposit, becomes the stronger tool. So the first thing we do is look at your actual 1099s and deposits together and tell you honestly which program wins. Let's look at your 1099s →

How it compares to the alternatives

Program	Best when
1099	Clean 1099s from a few steady payers
Bank Statement	Many sources / cash-heavy / big deposits
P&L	Business owner w/ cooperative CPA
Conventional	Clean returns showing strong net income

1099 pros & cons FAQs

Biggest advantage?

Gross income + lightest docs of any self-employed loan.

Biggest drawback?

Higher down + non-QM pricing; needs clean 1099s.

Cheaper than bank statement?

Similar non-QM range; 1099 may need slightly more down.

Will write-offs hurt me?

No — that's the point; lender uses gross, not net.

Refinance later?

Yes — into conventional as your returns build.

Reviewed by the licensing team at Save Financial, a California-licensed mortgage brokerage (NMLS #377740, DRE #01875766) founded in 2009 and serving all 58 counties. Nothing here is tax advice.

1099 Loan Pros and Cons in California

On this page

The pros

✓ Advantages

The cons

✗ Drawbacks

How it compares to the alternatives

1099 pros & cons FAQs

For a contractor with clean 1099s, this is the simplest path to yes.

1099 Loan Pros and Cons in California

On this page

The pros

✓ Advantages

The cons

✗ Drawbacks

How it compares to the alternatives

1099 pros & cons FAQs

Keep learning

For a contractor with clean 1099s, this is the simplest path to yes.