The Quick Read: A semi-retired contractor with large savings and shrinking work usually fits asset depletion better. A contractor with steady, recent 1099 income and modest savings usually fits a 1099-only loan better. Asset depletion turns savings into qualifying income. A 1099-only loan is reviewed around the income your 1099 forms show.
- Asset depletion divides usable assets by 60 months to create monthly qualifying income, which runs through the debt-to-income test.
- A 1099-only loan rewards recent, consistent contractor income. Declining income weakens it.
- Neither is a DSCR loan. Both qualify you personally, not the property.
- On the asset depletion path, usable assets must typically reach the lesser of $1,000,000 or 1.25 times the loan balance, never below $250,000 liquid when assets are your only income source, subject to underwriting.
- A third option, assets alone, can cover the whole loan with no income documented.
The Honest Answer First
If your 1099 work is winding down and your accounts are large, asset depletion usually tells your story better. Your savings don’t shrink year over year the way a contractor’s billings can. The lender doesn’t need proof that you’re still working.
If you still bill steadily, have several recent 1099s, and keep your savings modest, a 1099-only loan may fit. It counts the work you’re actually doing. It is not a “no-doc” loan. You’re still underwritten on credit, assets, and the property.
Most semi-retired contractors land in between. That’s where the comparison gets interesting, and where the details below matter.
Side-by-Side
The table shows published industry norms for the 1099-only column. The asset depletion column shows parameters from select lenders in Lendmire’s wholesale network, subject to underwriting.
| Factor | Asset Depletion | 1099-Only Loan |
|---|---|---|
| Review basis | Usable assets ÷ 60 months | Income shown on 1099 forms |
| Key documents | Account statements | 1099-NEC forms, plus year-to-date support |
| Employment proof | None when assets are the only income | Ongoing contractor work |
| Property types | Primary, second home, investment | Varies by program |
| Entity vesting | Generally an individual; confirm program | Generally an individual; confirm program |
| Reserves | No published reserve months | Typically required; varies |
| Main failure risk | Assets too small or too illiquid | Income declining or inconsistent |
A few notes. Depletion statements must be at least 120 days old at application, plus one within 45 days. The 1099 column varies by lender, and market surveys describe typical files as needing a profit and loss statement or bank statements alongside the forms. Timelines depend on the file, so this article skips them.
How Asset Depletion Works for a Contractor
Asset depletion converts savings into a monthly income figure. Here is the shape of it. Say you hold $1,500,000 in securities and $300,000 in cash. Securities count at 80%, which is $1,200,000. Cash counts at 100%, which is $300,000. Together that is $1,500,000 usable. Divide by 60 months and you get $25,000 of monthly qualifying income, which then has to carry the housing payment and your other debts through the debt-to-income test. This is illustrative, and the lender’s own calculation governs.
You keep the assets. Nothing is sold or pledged. The math is a qualifying convention.
The haircuts matter. On the depletion path, cash and CDs count at 100%, securities at 80%, private stock at 75%, retirement accounts at 70% at any age, and real-estate equity at 60%. A contractor whose wealth sits in a 401(k) gets a smaller number than one holding cash. Custodial accounts, deferred compensation, escrow accounts, foreign funds, cash on hand, stock options, and unvested restricted stock units don’t count at all.
Leverage on this path tops out at 80% on a purchase or rate-and-term refinance for a primary residence or second home. Cash-out on those is 60%. For an investment property, it is 65% on a purchase or rate-and-term and 60% on cash-out. Loan sizes run from $125,000 to $3,500,000. Credit follows the lender’s matrix, and a first-time investor needs 700. All of this is through select programs, subject to underwriting.
How a 1099-Only Loan Works
A 1099-only loan documents your income with 1099 forms instead of full traditional personal-income documentation. The IRS says payers report nonemployee compensation on Form 1099-NEC, generally filed by January 31, and that no taxes are withheld from contractors. Lenders usually add a year-to-date profit and loss statement or bank statements to show the current year.
Underwriters commonly look at the prior year’s 1099 total alongside this year’s income. For a semi-retired contractor, the trend matters as much as the total. A drop from one year to the next reads as risk.
Watch the reporting threshold, too. A contractor with many small clients may have earned more than their 1099s show. Income that no 1099 reports has to be supported another way, and that is often where a bank statement program becomes the cleaner route. Lendmire’s piece 1099-Only Program vs Bank Statement Loan for a Contractor covers that fork.
When Asset Depletion Is the Better Fit
Choose asset depletion when your savings are large and your work is fading.
- You’ve mostly wound down. Your 1099s are shrinking or irregular, but your accounts are sizable. Depletion doesn’t ask you to prove ongoing work.
- Your assets are liquid. Cash, CDs, brokerage accounts, and money market funds count at or near full value.
- You sold a business or received an inheritance or settlement. Those funds are excused from the 120-day seasoning rule on the depletion path.
- You want the loan sized to your balance sheet. The qualifying income comes from what you hold, not what you billed last year.
The trade-offs are real. Your down payment, closing costs, and reserves all come out of the same pool. Money spent on one purchase can’t be counted again. Retirement-heavy portfolios get hit by the 70% haircut. And a loan this way leans on your assets for every later purchase too.
There is also a cleaner variant. On the asset qualifier path, eligible assets must equal or exceed the entire loan amount, and no employment or income is documented. Brokerage, CDs, money market, and savings count at 100%. Retirement accounts count at 90% under age 59½ and 100% after. An $800,000 loan backed by $330,000 in brokerage, $300,000 in a 401(k) under 59½ (counted at 90%), and $200,000 in savings counts $800,000 of usable assets. Leverage runs up to 80% on a purchase and 75% on a refinance, on principal residences and second homes, through select programs. A borrower sits on one path at a time, and the assets are documented either way, with 60 days of seasoning and two months of statements per account. If you qualify here, you skip the debt-to-income test.
When a 1099-Only Loan Is the Better Fit
Choose a 1099-only loan when your income is still active and your savings are the thinner side of your file.
- You still bill steadily. Recent 1099s, a clean year-to-date, and a stable client base give the underwriter something solid.
- Your assets are modest. Depletion needs real size. If you can’t reach the minimum asset test, income is your route.
- Your wealth is illiquid. If your net worth sits in a business, real estate, or property you don’t want to count down, earned income may carry more weight.
- You’re early in the transition. If you’re only a few months into slowing down, your numbers may still look like a full-time contractor’s.
The weak spots are the mirror image. Declining income, client concentration, and income paid through an entity all complicate the file. Late in the calendar year, partial 1099 documentation can look thin, which is when a bank statement program may be cleaner.
The Semi-Retired Middle Ground
Many contractors fit neither pure case. They still bill something and still hold something. In that situation, asset-derived income can supplement documented income up to a 45% debt-to-income ratio on the depletion path, and the minimum-assets rule is waived when it supplements. Whether a particular program lets you blend a partial 1099 stream with depleted assets is something to confirm in the guidelines, because lenders handle it differently. A broker who sees many lenders’ guidelines can usually tell you which ones are friendly to a blend.
What About Buying a Rental?
If you want an investment property and not a home to live in, another option deserves a look. DSCR loans qualify primarily on property-level rental income covering the payment, subject to lender guidelines. They test the property, not you. A semi-retired contractor with a strong rental can often leave both depleted assets and 1099 income out of the file.
DSCR loans are designed for non-owner-occupied investment properties. Because they are business-purpose investor loans, they are reviewed differently from a standard owner-occupied mortgage. The Federal Register’s ability-to-repay rule notes that investment-purpose loans are treated as business-purpose.
The decision tree is simple. Buying a primary or second home puts asset depletion or a 1099-only loan in play. Buying a rental points toward DSCR, which also keeps your savings intact for the next deal. Lendmire’s complete DSCR loans guide walks through that path. Programs below 1.00 coverage are available through select lenders, though leverage and terms adjust.
Mistakes That Sink These Files
- Assuming 1099-only means no documentation. You still document income and get fully underwritten. It’s a different document set, not a skipped review.
- Assuming depletion means selling. You keep your accounts. Nothing is liquidated.
- Counting assets twice. Down payment and reserves come out of the pool before you divide.
- Counting ineligible assets. Cryptocurrency, precious metals, collectibles, and borrowed funds are not published as eligible on either path. The documented route is converting them to a seasoned cash balance in a regulated account, with the source reviewed.
- Ignoring the income trend. A shrinking 1099 total looks worse than a flat one.
Document Checklist
Asset depletion: statements for every account you want counted, dated within the lender’s seasoning window, plus a credit review and the property details.
1099-only: your 1099-NEC forms, a year-to-date profit and loss or bank statements, and the same credit and property review.
Balanced Verdict
Pick by the direction your income is heading. If it’s falling and your accounts are big, asset depletion usually reads cleaner. If it’s steady and your accounts are lean, a 1099-only loan keeps you from drawing down your pool. If you’re buying a rental, test DSCR first, since it may keep both out of the file.
This is general information, not legal or tax advice. Tax treatment varies; consult a qualified professional, such as an attorney or CPA, about your own situation.
Frequently Asked Questions
Can I combine 1099 income with asset depletion?
Sometimes. On the depletion path, asset-derived income can supplement documented income up to a 45% debt-to-income ratio, and the minimum-assets rule is waived. Programs differ on how they handle a blend, so confirm in the specific guidelines.
Do I have to sell my investments?
No. You keep your accounts. The lender counts a portion of the balance as a qualifying convention, and nothing is sold or pledged.
Do retirement accounts count?
Yes, in different ways. On the asset qualifier path they count at 90% under age 59½ and 100% after. On the depletion path they count at 70% at any age, subject to underwriting.
Is a 1099-only loan a no-doc loan?
No. It uses 1099 forms instead of full traditional personal-income documentation, but credit, assets, and collateral are still reviewed. Income is documented, just differently.
Which is better if my work is slowing down?
Asset depletion usually handles a slowing contractor better, if your balances are large enough to meet the asset test. A 1099-only loan weighs the trend, and a falling trend counts against you.
If you are qualifying on assets rather than income and want to see how the numbers work, Lendmire can help you compare asset-based mortgage options based on your statements, the property, credit profile, leverage, and your goals.
About Lendmire
Lendmire — NMLS# 2371349 — is a mortgage broker that arranges bank statement, P&L-only, 1099-only and asset-based home financing in 16 states through wholesale lenders, on primary residences, second homes and investment properties. Every option is subject to the lender’s guidelines and full underwriting. Scotsman Guide named Lendmire a Top Mortgage Workplace in both 2025 and 2026.
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References
1. IRS: Reporting nonemployee compensation
2. Federal Register: ATR and QM standards
This article is part of Lendmire’s asset-based mortgage program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: Asset Depletion vs DSCR for a Retired Buyer With No Paycheck · Bank Statement Loan vs Asset Depletion Loan for Content Creators · How an Asset Depletion Jumbo Loan Works
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
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Disclosures. The information presented in this article is general market commentary, not financial, legal, or tax advice. Lendmire is a mortgage brokerage (NMLS# 2371349) — not a direct lender or depository institution — and loan placement is subject to lender underwriting. Nothing in this content represents a commitment to lend. Loan terms, pricing, and program availability vary based on borrower qualifications, property characteristics, and state of subject property, and are subject to change at any time. Lendmire complies with Equal Housing Opportunity requirements. Consumer access: nmlsconsumeraccess.org.