The Quick Read: A 1099-only mortgage tests whether you earn enough to carry a long-term loan, while a hard money loan tests whether the deal, the rehab plan and the exit can repay a short-term one, so most flippers use hard money to buy and renovate and a mortgage product only to hold. These two loans answer different questions. Picking between them is mostly a matter of what you plan to do with the house.
- A 1099-only mortgage is a personal-income, long-term loan. It does not fund a rehab.
- Hard money is an asset-based, short-term business loan built around the property, the plan and the exit.
- Strong 1099 income helps the mortgage file. It matters much less on a hard money flip.
- Many flippers pair the two: hard money to buy and renovate, then long-term DSCR financing to hold.
The honest answer comes down to your plan. If you intend to buy, renovate and sell, the loan has to fit a short timeline and release renovation money. That is hard money territory. If you plan to buy a finished property and hold it for years, and your documented 1099 income is strong, a 1099-only mortgage can work. If you plan to renovate and then rent, you will probably want both, in sequence. A flipper with strong income but a weak deal gets little help from the mortgage. A flipper with a strong deal and messy income can still get a hard money file reviewed.
What this loan actually costs to carry.
Hard money is sized against the project and priced by time. Enter the deal and see how much the program will lend, the cash required at closing, the carry while you hold it, and what is left at the exit.
Leverage tiers on the current program: 85% with fewer than 2, 90% with 2 or more, 93% with 5 or more completed projects — every tier capped at 75% of after-repair value. Loan amounts up to $5,000,000, larger by exception; terms of 6 to 18 months, interest-only, no prepayment penalty. The rehab portion funds in draws against completed work, not at closing.
Program parameters shown update from Lendmire’s centralized guideline source. Rate, points, and months are editable assumptions, not quoted terms.
Cost cap sets the loan · positive spread
Illustrative estimate only — not a quote, Loan Estimate, approval, or commitment to lend. Rate, points, and months are editable assumptions. Hard money is business-purpose financing for real estate investors, not a consumer mortgage. Leverage on the current program tops out at 93% of project cost for investors with a documented track record, capped at 75% of after-repair value, with rehab funding up to 100% of the documented budget released in draws; actual terms vary by lender, borrower experience, property, and exit. Lendmire is a mortgage broker, not a lender.
Side-by-Side
| Factor | 1099-Only Mortgage (industry norms) | Hard Money (network parameters) |
|---|---|---|
| Review basis | Borrower’s documented self-employed income | Property value, rehab plan, exit |
| Documentation | 1099s, traditional personal-income documentation, bank statements, P&L | ID, contract, scope, budget, proof of funds |
| Credit | Lender-set; stronger scores help | 620 minimum; added conditions below 660 |
| Property types | Lender-set; often owner-occupied or rental | Non-owner-occupied, 1-4 units |
| Entity vesting | Often personal name; entity use varies | Personal or LLC; entity papers common |
| Term shape | Long-term, fully amortizing | 6-18 months, interest-only |
| Rehab funding | Not built for it | Draws against completed work |
| Reserves | Lender-set; commonly expected | Proof of funds for down payment and reserves |
| Exit | Hold the loan | Sale or refinance |
The first column shows published industry norms for 1099 programs. The second reflects typical parameters across Lendmire’s wholesale network of lenders. Both vary by lender, property and borrower, and nothing here is a commitment to lend.
Key Terms Defined
1099-only mortgage: a non-QM loan for self-employed borrowers that starts from gross 1099 income instead of net income after write-offs.
Non-QM: a mortgage that sits outside standard agency guidelines, so each lender sets its own documentation rules.
Hard money loan: a short-term, interest-only loan secured by real estate, approved mainly on the deal.
After-repair value (ARV): the estimated value of the property once renovations are finished.
Loan-to-cost: the loan as a share of purchase price plus rehab budget, used instead of a plain LTV on flips.
Seasoning: the time a lender wants you to have owned a property before it will refinance against the new value.
How a 1099-Only Mortgage Actually Qualifies You
Conventional underwriting starts with net income after deductions. A contractor who writes off heavily can look like a modest earner on paper. Non-QM 1099 programs exist for that gap. They begin with gross 1099 totals and apply an expense factor. The size of that factor varies by lender, so treat any number you see online as a lender-specific term, not a rule.
Expect the file to include 1099 forms, traditional personal-income documentation, and sometimes bank statements or a profit and loss statement. Lenders commonly want about two years of steady self-employment. A recent switch from W-2 pay to 1099 work can weaken the file, and so can declining income.
Your debts count too. Credit, existing obligations and cash to close all matter. This is a borrower-underwritten loan.
Here’s the catch for flippers. The mortgage was built around your earnings, not a renovation. It has no draw schedule and no short-term structure. Resale proceeds from a flip also are not the same thing as the 1099 income the lender documents. That mismatch is why the product rarely fits the flip itself.
How Hard Money Qualifies the Deal
Hard money turns the question around. The lender looks at the property’s current value and its ARV. It reviews the scope of work, the budget, and how you plan to get out. Your cash in the deal and your track record shape leverage.
Across the network, the leverage ladder is tied to documented completed projects and varies by lender, property and experience:
- Fix-and-flip loans reach 93% of project cost at 5 or more completed projects, 90% at 2 or more, and 85% with fewer than 2.
- Every tier is capped at 75% of after-repair value.
- Renovation money, up to 100% of the rehab budget, is released in draws as work is completed. That is a budget figure, not a purchase LTV.
- Bridge purchases without rehab go up to 80% of purchase price, and refinances up to 65% of value.
Loan amounts run up to $5,000,000. Terms are 6 to 18 months, interest-only, with no prepayment penalty. Credit starts at a 620 minimum, with added conditions below 660, and first-time investors qualify at the lower leverage tiers. Collateral is non-owner-occupied residential property of one to four units. Owner-occupied homes are out.
Credit is still checked. Underwriting just stays anchored to the property, the plan and the exit. Do not read that as “ignores the borrower.” Experience, cash and reserves all move the file.
When a 1099-Only Mortgage Is the Better Fit
A 1099-only mortgage is the better fit when you are buying to hold, your documented income is strong, and no short-term renovation money is needed. Think of a contractor buying a finished property to live in or to keep for years. It also fits a borrower who has already stabilized a property and wants a long-term loan built on income.
Three situations favor it:
1. Your 1099 history is long and steady. Two or more years of clean self-employment is the strongest version of this file.
2. The property needs no rehab funding. A mortgage cannot release renovation money in draws.
3. You want a long hold. Interest-only balloon structures create pressure that a long-term loan does not.
The flip point is simple. If the plan involves a renovation and a sale or refinance within about a year, the mortgage is the wrong tool, however good the income. And if your write-offs shrink the income the lender will use, even a strong earner can fall short.
When Hard Money Is the Better Fit
Hard money is the better fit when the deal drives the economics and you need renovation funding on a short horizon. Buy, renovate, then sell or refinance. That is what the structure was designed for.
It also suits borrowers whose income is hard to document. A freelancer whose deductions are heavy can be reviewed on the property and the plan instead. The 620 minimum credit score still applies, with added conditions below 660.
Picture a 1099 contractor on a first flip. Under the leverage ladder above, that borrower sits at the lowest tier, with leverage reaching 85% of project cost and capped at 75% of ARV. The borrower brings cash for the rest, plus reserves. A second and third completed project climb the ladder. Experience is the lever here, not income.
Hard money is not free of risk. The term is short. If a rehab runs long, holding costs pile up. If the appraisal misses the ARV, the exit shrinks. (A stalled flip is the most expensive kind.) Hard money suits investors who have priced the exit before buying. It does not suit investors hoping to figure out the exit later.
Can a Flip Even Use a 1099 Mortgage?
Only in narrow cases, and occupancy decides it. Investment loans on non-owner-occupied property are treated as business-purpose credit. The Federal Register notice for the ability-to-repay rule says so directly. The CFPB’s Regulation X likewise exempts business-purpose loans and temporary financing such as construction loans from RESPA.
In practice, a true flip is business purpose and fits hard money. If you plan to live in the house, the loan is a consumer mortgage and the rules change. Business purpose does not mean rule-free either, since some states still license lenders on residential-secured loans. Any occupancy plan that blurs the line is worth reviewing with an attorney before you choose a product.
The Exit Most Flippers Skip Planning
The common sequence is hard money first, long-term DSCR financing second. A DSCR loan is reviewed primarily on property-level rental income covering the payment, subject to lender guidelines. Many investors refinance out of hard money this way once a renovated property is leased and stable, and Lendmire arranges that path through its network.
Plan the takeout before you sign the short-term loan. Here is what the network typically looks for on the refinance side:
- Cash-out leverage: tops out around 75% LTV on a standard rental cash-out refinance, with about 6 months of seasoning as the common expectation.
- Coverage: 1.00 is where many select programs start. A separate select-lender path goes below 1.00, with leverage and terms adjusted.
- Credit: a 620 floor exists in parts of the network, most programs want around 660, and 700+ opens the strongest leverage tiers.
- Reserves: commonly around 6 months of PITIA, though they vary by lender, leverage, loan size and transaction type.
A modeled example makes the sequence concrete. Say a flipper’s renovated rental appraises at a value that supports a 75% cash-out loan, and rent covers the new payment at roughly 1.15x. The new loan must also repay the hard money payoff. If the appraisal comes in under the planned ARV, the cash-out shrinks, and the gap comes out of the flipper’s pocket. Size the exit on a conservative appraisal, not the projected one. Terms vary by lender guidelines, property type, leverage, credit profile, and full file review.
Clearing 1.00 also is not the same as positive cash flow. DSCR compares rent to principal, interest, taxes, insurance and any HOA dues. Repairs, vacancy, management, utilities and capex sit outside the number.
Seasoning is lender policy, not law, so it varies by program. A 6 to 18 month hard money term has to leave room for the renovation, the lease-up and the seasoning period. This one is tight on short terms.
What to Gather First
Prepare differently for each path.
For a 1099-only mortgage:
- Two years of 1099s and traditional personal-income documentation
- Recent bank statements, and a P&L if the lender asks for one
- Proof of how long you have been self-employed
- A clear list of your current debts
For hard money:
- Government ID and, if you borrow through an entity, the entity documents (subject to lender program eligibility)
- The signed purchase contract
- A scope of work and line-item budget
- Proof of funds for the down payment and reserves
- A written exit plan, plus a list of completed projects if you have them
Keep your personal and business funds separate. Mixing them is a common way to muddy a file on either path. Tax treatment can depend on how the funds are used and how the property is held; investors should keep clear records and speak with a qualified tax professional before relying on any deduction.
Where Flippers Go Wrong
Three mistakes show up repeatedly. First, applying for the wrong product. Income-documentation loans were built for earners, not renovators. Second, underestimating carry costs on an interest-only loan with a short term. Third, assuming the exit will work without checking seasoning and appraisal risk.
Another pattern is worth flagging. First-time flippers often expect leverage that only experienced investors receive. Beginners should plan for more cash in the deal. A prior rehab on a rental, or construction experience, may help with some lenders, though credit varies by lender.
There is also a second view on flipping with weak documented income. Some investors skip the mortgage side entirely and use asset-based financing at every stage. That works when the numbers support it. It is just not the only path.
The Verdict
Treat the two loans as tools for different jobs. A 1099-only mortgage fits a strong earner who is buying to hold. Hard money fits a deal-driven flipper who needs renovation money on a short horizon. A DSCR loan usually fits the stage after the renovation, once the property is leased and rent can carry the debt.
If you are unsure, ask three questions. Will you live in it? Does the property need rehab funding? Is the hold under about a year? “No, yes, yes” points to hard money. “No, no, no” points toward a long-term loan. Mixed answers point to the sequence.
Lendmire’s complete DSCR loans guide lays out how the long-term side works. For a related decision, see Lendmire’s article 1099-Only Loan vs Hard Money for a Conventional Cash-Out Refinance. 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. It operates as a broker placing loans through select lenders in a network spanning 41 markets, including Washington, D.C.
This article is general information, not legal or tax advice. Consult a qualified attorney or CPA about your own situation.
Frequently Asked Questions
Can a 1099 contractor get hard money for a flip?
Yes, because hard money underwriting centers on the property, the rehab plan and the exit, not on personal income forms. Credit still matters, with a 620 minimum and added conditions below 660. Experience and cash in the deal set the leverage tier, and terms vary by lender, property and experience.
Do I need traditional income documentation for a hard money loan?
Usually not as the core of the file. The lender focuses on the contract, scope, budget, proof of funds and exit plan. Some lenders still ask for background documents, so requirements vary. Conventional personal-income paperwork is central to a 1099-only mortgage instead.
Can I finance the renovation with a 1099-only mortgage?
Generally no. These loans are built for long-term ownership and have no draw schedule for renovation work. Hard money releases rehab funds in draws against completed work, which is the structure a renovation needs.
What happens if the flip does not sell before the term ends?
The borrower needs a plan B, usually a refinance into long-term financing or an extension negotiated with the lender. A DSCR refinance depends on seasoning, appraisal and rental coverage, so confirm those details before the short-term loan starts. Terms run 6 to 18 months, so the margin for delay is small.
Will a DSCR loan replace my hard money loan?
It can, if the property is leased, appraises well and rent covers the payment at the coverage level the program requires. Cash-out leverage tops out around 75% LTV on a standard rental. The new loan has to cover the payoff, so size it on the appraisal. Exact terms depend on the lender’s guidelines, property type, leverage, and a full review of the borrower’s file.
About Lendmire
Lendmire is a DSCR-focused mortgage brokerage, NMLS# 2371349, placing investor loans across 41 markets, including Washington, D.C. DSCR eligibility is generally reviewed by the lender around a property’s rental income rather than personal income documentation, which fits LLC-held rentals, self-employed investors, and portfolios scaling past conventional financed-property limits. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. Federal Register – Ability-to-Repay and Qualified Mortgage Standards (final rule)
2. CFPB – Regulation X § 1024.5, Coverage of RESPA
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Is a Hard Money Fix and Flip Loan Worth It for a Business Owner? · Can You Get a Hard Money Loan Without Owning a Business? · Can an Investor Get a Hard Money Loan Without Verifying Income?
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosure information. Lendmire is a state-licensed mortgage brokerage under NMLS# 2371349. Lendmire is not a depository institution, direct lender, or financial advisor — all loans referenced are placed through wholesale lender partners and are subject to each lender's underwriting standards. This article is provided for general informational purposes and is not a commitment to lend, nor does it constitute financial, legal, or tax advice. Loan programs, terms, rates, and qualification standards change without notice and depend on borrower profile, property type, and the state in which the subject property is located. Equal Housing Opportunity provider. NMLS Consumer Access: nmlsconsumeraccess.org.