The Quick Read: A hard money lender counts the verified, documented cash you bring to the deal, and your 1099 income is mostly not part of that count. The loan is sized on the property and the project, so the lender asks whether your cash is real, sourced, and enough to cover the gap.
- Leverage is measured on project cost and capped against after-repair value (ARV). Your income is not the test.
- On a flip, the top tier is 93% of project cost at 5+ completed projects, 90% at 2+, and 85% below 2. Every tier is capped at 75% of ARV.
- A bridge purchase with no rehab funds up to 80% of purchase price, subject to lender guidelines.
- Rehab holdback is not your down payment. Draws reimburse completed work.
- Your 1099 shows up in bank statements, where lumpy deposits draw source-of-funds questions.
Say you are a self-employed electrician who wants to flip a duplex. You have no W-2, your traditional personal-income documentation shows heavy write-offs, and a conventional lender would shrug. Hard money works differently. This article walks through what the lender actually counts, how it verifies the cash, and where the usual rule bends.
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.
Why Does a 1099 Contractor’s Income Matter Less in Hard Money?
Hard money is a property-first product. The lender sizes the loan on the purchase price, the rehab budget, the after-repair value, and your exit plan. HousingWire’s explainer describes these loans as asset-based, with lenders weighing the property above the borrower’s credit score, though financial history and experience still count.
That is the key point for a 1099 earner. A conventional lender averages the net income on your traditional personal-income documentation, and heavy write-offs shrink that number. A hard money lender is not running that test. Your taxable income does not decide the loan size.
Three things still get reviewed: credit (a 620 minimum score on the program, with added conditions below 660), liquid assets, and experience. Experience matters most for leverage, because the top tiers are reserved for investors with completed projects. All of this varies by lender, property, and experience.
How Does the Lender Define the Down Payment?
Your down payment is the part of the deal the loan does not cover, paid from your own funds. On a purchase, that is simple. On a rehab deal, it takes two tests.
The loan is limited by the lower of two numbers: the loan-to-cost tier and the cap against ARV. Loan-to-cost means the loan as a share of purchase price plus rehab budget. On a thin-margin deal, the ARV cap can bind first, and your required cash goes up. Neither test looks at income.
Here is how it plays out in practice. Run the numbers on a first-time flipper at the 85% of project cost tier. The lender funds 85% of cost, you cover the rest, and the 75% ARV cap can still pull the loan lower if the margin is thin. Across the network, the equity gap on these files commonly lands somewhere around 7% to 15% of project cost. Market surveys report 20-30% down at most hard money lenders (HousingWire). The network tiers above are the ones that apply here.
One myth deserves a direct answer. There is no true 100% purchase program. What exists is up to 100% of the rehab budget, funded in draws against completed work. That is a rehab figure, never a purchase loan-to-value.
What Counts as Down Payment and What Doesn’t?
Cash that sits in accounts in your name, with a clear paper trail, counts. Cash that appears out of nowhere or comes with strings gets questioned. Treatment varies by lender, so this table shows typical handling, not a promise.
| Source of funds | Typical treatment | What to document |
|---|---|---|
| Personal savings | Counts | Recent statements |
| Business account funds | Usually counts | Statements plus invoices |
| Client payments | Counts once deposited | Invoices matching deposits |
| Sale proceeds | Counts | Settlement statement |
| Borrowed funds (cards, partner money) | Lender-dependent | Terms and a written explanation |
| Gift funds | Lender-dependent | Gift letter and transfer record |
| Retirement funds | Counts once liquidated | Withdrawal record |
| Cash under the mattress | Rarely counts | Needs a banked trail |
| Your own labor | Does not count as cash | Not credited |
Borrowed down payments split lenders. Some accept a documented draw, some cap the borrowed share, and some want part of the funds unborrowed. A lender quoted in one BiggerPockets thread said funds need no seasoning if they sit in accounts in your name. Ask on the front end, because policies differ.
Cross-collateral is another variation. Pledging a second property can reduce the cash you bring, but that is a lender-by-lender feature.
How Does the Lender Verify the Cash?
The lender checks that the money exists, that it is yours, and that it covers more than the down payment. The steps run in a predictable order.
1. Statements. You supply bank or asset statements covering the equity gap, closing costs, fees, and reserves. Statements prove assets, not income.
2. Deposit review. The underwriter reads recent activity. An unexplained large deposit draws a request for the source.
3. Seasoning. Seasoning is how long funds have sat in your account. Policies vary. One lender told a poster on a BiggerPockets thread that no asset seasoning applies, and the same thread notes lenders differ. There is no universal period, so ask early.
4. Borrowed-fund check. If any of the cash came from credit, the lender wants to know.
5. Entity and identity. If you buy in an LLC, expect to provide LLC documents, subject to lender program eligibility. You will also provide ID and the purchase contract. A personal guarantee is common.
Investor commentary on BiggerPockets suggests private and lower-doc lenders are less likely than banks to make a large deposit an issue, and a well-written letter of explanation can often settle it. Do not read that as permission to skip the paper trail.
Where Does the 1099 Actually Show Up?
In your bank accounts. A contractor gets paid in lumps from several clients, sometimes into an account that also pays groceries. Those statements are hard to read.
A few habits make them readable:
- Keep business and personal money in separate accounts well before you apply.
- Match large deposits to invoices or payment records, and keep them in one folder.
- Do not move cash around the week before you apply. Last-minute transfers invite questions.
- Move down-payment money into one clearly labeled account early.
Heavy write-offs are not a problem here. A 1099 investor who deducts aggressively can still fit the file, because the test is the deal, not taxable income. A conventional lender would average that same net income instead. Hard money lenders still review credit, assets, and reserves, so the 1099 is not invisible. It just is not the gate.
Does Your Own Labor Count as Down Payment?
No. Sweat equity does not count as cash. A contractor who does their own rehab work saves real money on the budget, and that can make the deal better, but the lender credits documented cash, not hours.
Two cautions follow. First, a budget built on your own free labor may be questioned if the numbers look unrealistic against the scope of work. Second, the draw process reimburses documented completed work. How your self-performed labor is treated in draws is lender-specific, so raise it before you apply.
Down Payment vs. Total Cash Needed
Your cash to close is bigger than your down payment. It is the equity gap plus closing costs and lender fees. Reserves and contractor float sit on top.
That float matters. Rehab money sits in holdback and is released in draws after inspection. At closing, only the purchase portion is wired. You then front contractor costs between draws and get reimbursed. So lenders look at liquidity beyond the down payment.
A low advertised down payment can hide higher cash needs elsewhere. Interest-only carry during the project is one example. Plan for the whole stack, not one line of it.
A Sample File: A 1099 Contractor Buying a Flip
Consider a modeled scenario, not a market fact. A contractor with a 680 score and one completed project buys a distressed small multifamily. That puts the file in the 85% of project cost tier, with the 75% ARV cap as the second test.
| Item | How the lender treats it |
|---|---|
| Traditional personal-income documentation with heavy write-offs | Not the sizing test |
| Credit | Above the 620 minimum |
| Down payment | Cash outside the loan, sourced from statements |
| Large client deposit | Matched to an invoice, with a letter |
| Rehab budget | Funded in draws, not counted as down payment |
| Reserves and float | Reviewed on top of the down payment |
The result: the file turns on the deal and the cash trail. If the ARV cap binds, the contractor brings more cash than the 85% tier alone suggests. Whether any file qualifies depends on lender guidelines, credit review, and the property.
What Goes in the Document Packet?
- Two recent months of statements for every account holding funds
- ID and the signed purchase contract
- LLC documents, if buying in an entity
- Scope of work and rehab budget
- Invoices matching any large deposit
- A short letter of explanation for unusual deposits
A strong letter is plain. State the date and amount of the deposit, say who paid it and why, and attach the invoice. Keep it to a few sentences.
Edge Cases Where the Rule Bends
Mixed-purpose loans. A hard money loan is business-purpose, meaning the funds go toward acquiring or improving rental or flip property. Under CFPB Regulation Z, the lender decides case by case whether the primary purpose is business, so a loan with a personal component changes the analysis.
Secondary financing. Funding your hard money down payment with another hard money loan can cause trouble at the exit. Many DSCR lenders restrict second liens, so disclose it up front.
First-timers. First-time borrowers generally see the conservative end of the leverage ranges, and the top tier is reserved for experienced investors.
Ineligible collateral. The program covers non-owner-occupied residential property, 1-4 units. Commercial, land, and owner-occupied property are not offered.
What Happens After the Rehab?
Many investors refinance out of hard money into long-term DSCR investor loans once the property is stabilized, and Lendmire brokers that path. Terms on hard money run 6-18 months, interest-only, so the exit plan matters from day one.
A DSCR loan compares rent to the full monthly housing obligation (principal, interest, taxes, insurance). Select programs start at 1.00 coverage, and a separate select-lender path takes coverage below 1.00 with leverage and terms adjusted. Clearing 1.00 is not positive cash flow, since repairs, vacancy, management, and capital expenses sit outside the ratio. Seasoning for the takeout depends on the new lender. The complete DSCR loans guide covers the takeout in detail.
Key Terms Defined
Down payment: the part of the purchase the loan does not cover, paid from your own verified funds.
Loan-to-cost: the loan as a share of purchase price plus rehab budget.
After-repair value (ARV): the estimated value of the property once the work is done.
Seasoning: how long funds have sat in your account before the lender counts them.
Source of funds: the documented origin of the cash you bring.
Holdback: rehab money held by the lender and released in draws after inspection.
Liquidity: cash and near-cash you can reach, beyond the down payment itself.
This article 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
Do I need two years of traditional income documentation as a 1099 contractor?
No. Two years of returns is a conventional or agency requirement. Asset-based business-purpose loans size on the deal, though the lender still reviews credit, assets, and reserves, subject to lender guidelines.
Can a hard money lender finance 100% of the purchase?
No. There is no true 100% purchase program. Up to 100% of the rehab budget can fund in draws against completed work, and the top flip tier is 93% of project cost for experienced investors, capped at 75% of ARV. Terms vary by lender, property, and experience.
Will a large deposit from a client cause a problem?
It can prompt a question, not necessarily a denial. Keep the invoice and a short letter of explanation ready. Private lenders tend to be more flexible than banks on this point, but expect to document it.
Does my rehab budget count toward my down payment?
No. Rehab funds sit in holdback and are released in draws. Your down payment is cash you bring, and you will likely front contractor costs between draws.
What if I am short on cash?
Look at the full cash stack first, including fees, carry, reserves, and float. A smaller project, a stronger experience tier over time, or a different exit plan may help. 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. Reach the team at 828-256-2183, a mortgage broker arranging financing through select lenders across 41 markets, including Washington, D.C.
About Lendmire
Lendmire is a non-QM mortgage brokerage (NMLS# 2371349) arranging DSCR investor loans in 41 markets, including Washington, D.C., through wholesale and investor-lending channels. DSCR loans are evaluated by the lender on rental income rather than personal income, subject to lender guidelines — a fit for LLC-owned portfolios, self-employed investors, and operators scaling beyond conventional loan caps. Recognized as a Scotsman Guide Top Mortgage Workplace in 2025 and 2026.
Get Started
Ready to find the right loan for you?
In about 30 seconds you can review financing options available for your investment property. No commitment required.
Informational only. Not a Loan Estimate, approval, or commitment to lend. Program availability and eligibility are subject to lender guidelines, credit approval, property review, and underwriting.
References
2. BiggerPockets – business credit as proof of funds
3. BiggerPockets – first-time investor thread
4. BiggerPockets – large cash deposit thread
This article is part of Lendmire’s hard money loan program — full qualification details, guidelines, and scenarios live on the program page.
Related reading: How to Exit Hard Money When Your Appraisal Falls Under All-in Cost · Does Every Hard Money Lender Ask the Same Minimum Down on a Flip? · Hard Money Balloon Payment Terms for a Buy and Hold Rental
Brandon Miller
Founder & CEO, Mortgage Loan Originator, Lendmire LLC
- Mortgage Loan Originator · NMLS# 1129696 · Verify on NMLS Consumer Access
- North Carolina Real Estate Broker · License# 343312 · Verify on NCREC
- North Carolina Insurance Producer · License# 19053198 · Property, Casualty, Life, Health · Verify on NAIC SBS
- Lendmire LLC · Firm NMLS# 2371349 · Verify firm licensure
Compliance and disclosures. Lendmire (NMLS# 2371349) is a licensed mortgage broker and is not a direct lender, depository institution, financial advisor, or tax professional. Content in this article is general market analysis and educational information — not financial, legal, or tax advice for any specific situation. Lendmire does not guarantee loan approval; every transaction is subject to underwriting by the funding lender. Mortgage pricing and loan program guidelines are subject to change at any time without notice and vary by borrower characteristics, property type, and state regulations. Lendmire complies with Equal Housing Opportunity. Licensure verification: NMLS Consumer Access.