The short version. A 1099 program qualifies you on the income reported on your 1099s rather than on your tax return after deductions, usually with a far smaller expense factor than a bank statement loan applies. Strongest for contractors and consultants with low overhead. Call or text me at 704-890-7168.
You are an independent contractor. The money is real, the 1099s prove it, and yet a conventional lender takes those 1099s, follows them onto your Schedule C, subtracts every deduction you legitimately claimed, averages what survives across two years, and qualifies you on that.
A 1099 program stops at the first step. It reads the 1099 totals as your income and skips the return entirely.
For a contractor with genuine costs, crews, materials, equipment, a van, that is arguably too generous and lenders know it, which is why most apply a modest expense factor to the 1099 totals before arriving at qualifying income. For a consultant whose overhead is a laptop, a phone and a software subscription, the difference between what the 1099s say and what the tax return says can be most of a down payment.
These two products get confused constantly, and they are not interchangeable.
| Your situation | Usually better | Why |
|---|---|---|
| Paid on 1099s, low overhead, few deductions | 1099 program | Expense factor is typically smaller than a bank statement haircut, sometimes much smaller |
| Own a business, revenue arrives from many customers | Bank statement loan | Deposits capture revenue that never appears on a 1099 |
| Paid partly on 1099s, partly cash or card | Bank statement loan | 1099s would understate you by whatever is not reported on one |
| Heavy subcontractor or materials costs | Depends, price both | A large expense factor on either method may beat your actual tax return anyway |
| One large 1099 client, two years of history | 1099 program | Clean, verifiable, simple to underwrite |
The short rule: if nearly all your income arrives on 1099s, start here. If your 1099s capture only part of what the business earns, bank statement loans will usually treat you better.
Few regions in the country are as thick with 1099 income as the Washington suburbs, where an enormous amount of professional work runs through contracting vehicles rather than payroll, and where it is entirely ordinary to meet someone clearing high six figures as an independent consultant to a federal agency who has been declined twice because their Schedule C, after a home office and a vehicle and a solo retirement plan, reports a fraction of it.
That borrower is not marginal. They are mislabelled.
Two local wrinkles are worth naming. Contract-cycle income looks unstable on paper even when it is not, because recompetes, gaps between task orders and a contract that ended in March all make a two-year average look erratic to an underwriter reading it cold. And clearance holders have a specific reason to care about how many times a file gets shopped, since a loan declined four times with a hard pull each time is not a neutral event for them. There is more on both on the Northern Virginia page.
Most 1099 programs want two years of 1099s. Some will work with one.
The one-year option matters more than it sounds, because the classic hard case is someone who left a W-2 role eighteen months ago, is earning more as a contractor than they ever did as an employee, and keeps being told to come back when they have two years of history. A one-year program can solve that, particularly when the contracting work is in the same field as the job they left, which underwriters generally view as continuity rather than a career change. Expect to document the transition.
Hypothetical, not a client, and the figures are illustrative.
An IT consultant in Fairfax receives three 1099s totalling $310,000 for the year. Working from home, the real overhead is a laptop, software, insurance and some travel. After a home office deduction, the vehicle, a solo 401(k) contribution and the rest, the Schedule C reports $141,000.
| Method | Starting figure | Deduction | Qualifying income |
|---|---|---|---|
| Conventional, tax returns | Schedule C net | All deductions taken | About $141,000 |
| 1099 program, 10 percent factor | $310,000 of 1099s | $31,000 | $279,000 |
| 1099 program, 20 percent factor | $310,000 of 1099s | $62,000 | $248,000 |
| Bank statement, 50 percent factor | $310,000 deposited | $155,000 | $155,000 |
Look at the bottom row against the two above it. For this borrower the bank statement route, which is the one most people have heard of and the one most often suggested, is comfortably the worst of the three non-conventional options, because a 50 percent expense factor assumes a cost structure a solo consultant simply does not carry. Same income. Same documents available. A six-figure difference in what the file supports, decided entirely by which product someone put them in.
That is the argument for asking about both rather than taking the first program offered.
This is the part you can actually influence, and most borrowers never think to.
An underwriter reading two years of 1099s sees numbers on a page with no context, so a year that dipped because one contract ended in March and the replacement did not start until June looks, from the outside, exactly like a business in decline. Nobody at the lender knows the difference unless someone tells them. The fix is unglamorous and it works: a short written explanation, in plain language, attached to the file before anyone has to ask for it.
What helps:
None of this is lender-specific and none of it requires special treatment. It is simply the difference between a file that answers its own questions and one that generates a round of conditions two weeks before closing.
Loan size interacts with all of this. The 2026 conforming limit for a one-unit property is $1,249,125 in the high-cost Washington metro counties and $832,750 across most of the rest of Virginia, both published by the Federal Housing Finance Agency.
For a Northern Virginia contractor that ceiling is doing real work, because it keeps a large share of Arlington, Fairfax and Loudoun purchases inside conforming territory where qualifying income is scrutinised less aggressively than it would be on a jumbo file. The same price in Richmond or Virginia Beach is jumbo, and jumbo underwriting is exactly where 1099 income gets questioned hardest. More on that split on the Virginia mortgage broker page.
I will run it as a 1099 file and as a bank statement file and tell you which one your numbers prefer. No credit pull to get that answer.
I am Scott Hastings, a mortgage broker with Arbor Financial Group. Self-employed and contract-paid borrowers are effectively my whole business, and a meaningful share of my Virginia files are independent consultants in the Washington metro.
Licensed in 13 states including Virginia. Individual NMLS ID 926762, verifiable on NMLS Consumer Access.
Mortgages by Scott has been accredited by the Better Business Bureau since 2015, and I have been originating mortgages for more than twenty years. WalletHub named me one of the best mortgage brokers in Charlotte for 2026.
For most contractors with low overhead, yes. Both replace your tax return, but a 1099 program typically applies a smaller expense factor than a bank statement loan does, and that gap can be worth six figures of qualifying income on the same borrower. The exception is when your 1099s capture only part of what you earn, for example if some clients pay by card or cash without issuing one. In that case deposits tell the fuller story and a bank statement loan usually wins. It costs nothing to price both.
Two years is the common requirement, and one-year programs do exist. The one-year option matters most for someone who left a salaried role recently and is now earning more as a contractor, especially when the contract work is in the same field as the job they left, which underwriters tend to read as continuity rather than a career change. Expect to document the transition from employment to contracting.
Most do, though it is usually far smaller than the one applied to bank statement deposits, and some lenders apply none at all depending on your occupation. The logic is that a 1099 reports gross payments before whatever it costs you to do the work, so a lender assumes some portion went out as business expenses. How much varies by lender and by what you do, which is one of the main reasons the same file produces different qualifying income in different places.
Yes, though it needs a lender comfortable combining the two rather than one that makes you pick. This comes up constantly with people who went independent partway through a year, or who keep a part-time salaried role alongside contract work. Send both sets of documents at the outset so the file goes to a lender whose guidelines handle the combination, because discovering the limitation late usually means starting over.
Possibly, but it may indicate a different product suits you better. If an entity receives the 1099 and pays you a salary or distributions, a profit and loss program or a bank statement loan often describes your situation more accurately than a personal 1099 program does. It depends on how the entity is structured and how money actually reaches you, so it is worth a conversation before you apply anywhere.
Often it does not need to be jumbo at all. The 2026 conforming limit in the high-cost Washington metro counties is $1,249,125, so a large share of Arlington, Fairfax and Loudoun purchases stay inside conforming territory, where qualifying income faces less scrutiny than on a jumbo file. Above that ceiling, 1099 programs exist but underwriting tightens and reserve requirements climb. Check your county’s limit before assuming which category you are in.
Send me your 1099 totals and I will run it both ways, as a 1099 file and as a bank statement file, before anyone pulls your credit.
Text Scott: 704-890-7168 Call 704-890-7168Scott Hastings, individual NMLS #926762. Arbor Financial Group, 121 N Main St Ste 202, Mooresville, NC 28115. Phone and text 704-890-7168. Licensed to originate mortgage loans in Virginia.
Equal Housing Opportunity. This page is general information about loan programs and is not a commitment to lend, a loan approval, or an offer of credit. Program availability, qualifying guidelines, credit score minimums, down payment and reserve requirements vary by lender and are subject to change. Nothing here is legal, tax or financial advice.
Loan limit figures are published by the Federal Housing Finance Agency and are current for 2026. Expense factors, documentation requirements and program availability vary by lender.
