Yes. Borrowers who receive 1099 income, independent contractors, freelancers, gig workers, and self-employed individuals, can qualify for a mortgage. The two main paths are: traditional qualification using 2 years of tax returns (net income after deductions), or bank statement loans that use 12-24 months of deposits instead of tax returns for borrowers whose write-offs make their taxable income look too low to qualify.
The Tax Return Route: Why Write-Offs Hurt
Self-employed borrowers and 1099 earners often aggressively deduct business expenses to minimize taxable income, which is smart for taxes but damaging for mortgage qualification. Lenders use net income (after deductions) from Schedule C or Schedule E, not gross revenue. If you earn $120,000 gross but write off $60,000 in expenses, your qualifying income is $60,000. This is why many 1099 earners who are financially successful still struggle to qualify for the loan amount they expect.
Bank Statement Loans: The Alternative
Bank statement loans are a non-QM product designed specifically for this situation. Instead of tax returns, lenders use 12 or 24 months of personal or business bank statements to calculate income. Typically, 50% of business deposits or 100% of personal deposits are counted as qualifying income. This allows borrowers who have strong cash flow but low taxable income to qualify based on what's actually coming in, not what's left after write-offs.
Which Path Is Right for You
The tax return route produces lower rates and is available on conventional, FHA, and VA products. It's the right choice if your net income after deductions is strong enough to qualify. The bank statement route carries a slightly higher rate (typically 0.5-1% above conventional) but opens up qualification for borrowers whose write-offs are too aggressive for the tax return path. Dan runs both scenarios and tells you which produces better results for your specific numbers.
2-Year History Requirement
Both paths require a 2-year history of self-employment or 1099 work in the same field. Lenders look for consistency: someone who has been a freelance graphic designer for 3 years is in a different position than someone who went self-employed 8 months ago. New self-employment, even with strong income, generally cannot be used until the 2-year mark is reached or tax returns establish the pattern.
The write-off problem is real and it affects a lot of successful self-employed people in Bakersfield. I've worked with contractors, oil field consultants, and business owners who earn more than most W-2 employees but show $40,000 on their tax returns after expenses. Bank statement programs were built for exactly this situation. The rate is a bit higher, but the access to the loan is worth it, and in some cases we can refinance into a conventional loan once the tax situation normalizes.
Have a situation like this?
Call Dan at (661) 342-9381. He will review your specific situation in a free call.