Can a 1099 Contractor Get a Hard Money Loan to Flip a House?

The Quick Read: Yes, a 1099 contractor can usually get a hard money loan to flip a house, because these business-purpose loans are sized on the property, the rehab plan, and the exit rather than on W-2-style income. How you are paid does not disqualify you, though lenders still review credit, cash, and experience.

• Fix-and-flip leverage is tiered by completed projects and is capped at 75% of after-repair value, varying by lender, property, and experience.
• Credit starts around a 620 minimum score, with added conditions below 660.
• Self-employment write-offs that shrink tax-return income matter far less here than on a conventional loan.
• Hard money terms are short, so the exit plan carries the file.
• A DSCR loan is the common take-out for investors who keep the property as a rental.

Why 1099 Income Trips Up Conventional Loans

Conventional underwriting reads your traditional personal-income documentation. A contractor who deducts vehicles, tools, and home-office costs shows low net income, even when real cash flow is strong. The lender divides that thin number into your debts and the file stalls.

Hard money skips that fight. The lender asks a different question: does this deal make sense, and can this borrower finish it? That reframing is the whole reason a contractor can often qualify where a bank says no.

How Hard Money Actually Underwrites a Flip

Across the wholesale network Lendmire works with, the file starts with the deal. The lender reviews the purchase contract, the scope of work, and the rehab budget. It then looks at an as-is value and an after-repair value (ARV).

Leverage is measured against project cost and capped against ARV. On the program parameters Lendmire brokers, fix-and-flip loans run up to 93% of project cost at 5+ completed projects, 90% of project cost at 2+ completed projects, and 85% with fewer than 2. Every tier is capped at 75% of ARV. Up to 100% of the rehab budget funds in draws as completed work is verified. That is a rehab-budget figure, not a purchase LTV. All of this varies by lender, property, and experience, and nothing here is a commitment to lend.

There is no true 100% purchase program. The top tier is reserved for experienced investors, and a first-timer should expect the lower tiers.

Terms run roughly 6-18 months, interest-only, with no prepayment penalty. Loan sizes go up to $5,000,000, larger by exception. Collateral is non-owner-occupied residential property of 1-4 units.

Why the Law Treats a Flip as Business Credit

Flip loans are business-purpose credit. Federal rules for consumer mortgages carve this out: CFPB Regulation Z § 1026.3 exempts credit extended primarily for a business or commercial purpose, and the creditor decides the primary purpose in each transaction. The Federal Register notice for the ability-to-repay rule says the same of credit extended primarily for business purposes.

The practical result: nothing forces a lender to verify 1099 income or calculate debt-to-income on a flip loan. That is a feature of the product, not a loophole. Lenders still set their own standards.

What Lenders Still Look At

Not income-based does not mean no standards. Underwriting stays asset-based, meaning property, plan, and exit, but the borrower still gets reviewed.

Lenders differ. Some ask for bank statements to verify cash, and a few look at taxable income. A contractor should expect questions about liquidity rather than a pay-stub request.

Does Being a Contractor Help?

It can. If you hold a contractor’s license and perform much of the work yourself, your trade background is relevant experience on the rehab side. Lenders weighing a first flip may view a borrower who can run a scope and control costs more comfortably.

Here is the catch. Your own labor does not replace the lender’s need for a documented budget, and it does not move you into a higher tier by itself. Leverage tiers track documented completed projects. A first-time flipper who is also a skilled tradesperson is still a first-time flipper on the leverage grid.

Hard Money, a 1099 Mortgage, or DSCR?

Contractors often land on 1099 mortgage pages first. Those are a different product, usually built for owner-occupied homes and reviewed on 1099 forms and bank statements. For a flip, they are the wrong tool.

Hard money is for owner-occupant-free, business-purpose deals only. If you plan to live in the house, the loan is likely consumer-purpose and generally outside what hard money lenders offer.

The Exit Is Where 1099 Income Resurfaces

Your income rarely matters at the front end. It can matter at the back end if you plan to keep the property.

Many investors refinance out of hard money into long-term rental financing once the property is stabilized, and Lendmire brokers that path. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines, so a contractor with heavy write-offs is not penalized for them. Lendmire’s complete DSCR loans guide explains how that review works.

Across the network, most DSCR files want credit around 660, with a 620 floor in parts of the network and 700+ unlocking the strongest leverage. Purchase leverage typically lands at 75%-80% LTV, and cash-out refinances top out around 75% LTV with about 6 months of seasoning common. Coverage of 1.00 is where select programs start, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 does not mean positive cash flow, since repairs, vacancy, and management sit outside the ratio.

Worked Example: A Contractor’s First Flip

Picture a licensed 1099 roofer with a 680 score and two flips on record. Under the tiers above, two completed projects point to the 90% of project cost tier, subject to the 75% ARV cap. If the ARV is modest relative to purchase plus rehab, the ARV cap, not the tier, becomes the binding limit. That means he brings more cash than the headline percentage suggests.

His traditional personal-income documentation, after write-offs, shows little income. That does not enter the underwriting. His liquidity, budget, and plan do. If he intends to hold, he lines up a DSCR take-out and checks that rent should cover the full monthly obligation with room to spare.

Now flip the scenario. A first-timer with no completed projects sits in the 85% tier, with the same ARV cap. If that borrower is stretching to hit the cap on thin cash, the better move is a lower-priced project or a stronger budget, not a hunt for a looser lender.

Common Reasons 1099 Borrowers Get Slowed Down

• Thin liquidity. Money for the down payment, closing costs, and reserves is the most common gap.
• A budget that doesn’t hold up. Underestimated labor or contingencies draw questions from lenders.
• No exit plan. A short interest-only term needs a clear sale or refinance path.
• Weak credit. Below 660, added conditions apply; below 620, the program is not available.
• Messy entity setup. Have LLC documents ready, and expect a possible personal guaranty.

Key Terms Defined

• ARV (after-repair value): The estimated value of the property once the rehab is finished.
• Loan-to-cost: The loan amount as a share of purchase price plus rehab costs.
• Draw: A release of rehab funds after a portion of the work is verified.
• Business-purpose loan: Credit taken for investment or commercial use, not for a home you live in.
• Take-out: The longer-term loan that repays the short-term flip loan.

Where This Goes Wrong

Hard money is a short-runway tool. With terms of 6-18 months and no multi-year options on the current program, a delayed rehab or a soft resale market can squeeze you. Investors who need longer runway usually refinance into rental financing, which means the property must qualify as a rental when the clock runs out.

Over-leverage is the other risk. A high loan-to-cost tier leaves little margin if costs run over. Funding the first flip with the strongest tier available is not always the smart move. If you are weighing funding structures at different deal sizes, Lendmire’s piece HELOC vs Hard Money for a Flip: Which Wins at Different Deal Sizes is a useful next read.

Tax treatment varies, and this article is general information rather than legal advice, so consult a qualified attorney or CPA about your own situation.

If you are buying, rehabbing or refinancing an investment property on a short timeline and want to see how the numbers work, Lendmire can help you compare hard money options based on the project, the exit plan, leverage, and your goals. Lendmire is a broker arranging financing through select lenders in its wholesale network across 41 markets, including Washington, D.C. Call 828-256-2183.

For current guidelines and terms, see Lendmire’s DSCR loan programs page.

About Lendmire

Lendmire (NMLS# 2371349) is a mortgage brokerage focused on DSCR investor financing, helping arrange programs through wholesale and investor-lending channels in 41 markets, including Washington, D.C. DSCR loans are evaluated by the lender on property cash flow rather than personal income, subject to lender guidelines, supporting LLC closings and accommodating investors with four or more financed properties. Scotsman Guide Top Mortgage Workplace in both 2025 and 2026.

References

1. CFPB, Regulation Z § 1026.3 Exempt transactions

2. Federal Register, Ability-to-Repay and Qualified Mortgage Standards