Getting a mortgage as a 1099

by Dale Davidson

I've never had a mortgage because I've been a life long renter.

But, I may end up buying a house after we move to the west coast so I wanted to learn how getting a mortgage would work if I were self-employed.

I called a mortgage broker in the Portland, OR area and he made a couple points:

  1. Generally speaking banks like to see two years of self-employment earnings to show a track record
  2. If you don't have two years, sometimes you can claim some form of continuity by showing you're in the same business/industry you were in as a W2 employee
  3. To gauge how much mortgage the bank is willing to underwrite, they will either
    • Average out your two years of income if Year 2 income is greater than Year 1. So if you made $100,000 in Year 1 and $150,000 in Year 2, they'll consider your income to be $125,000.
    • If your Year 2 income is less than Year 1, they'll take the lower number. So if in Year 1 you made $150,000 and then Year 2 you made $100,000., they'll use $100,000 as your income.

I haven't actually applied for a mortgage but the gist is that you'll just need to do a little more paperwork to reduce your perceived risk.

Here's an article on the Freddie Mac website describing what you might need as a 1099 to get a mortgage. It seems consistent with what the broker said.

Qualifying for a Mortgage When You're Self-Employed

If you're already a 1099 and have applied for a mortgage, what has been your experience?

Want the full playbook? Check out Going 1099.

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