What percentage of 1099 income is considered self-employed?

In the context of assessing self-employment income, the determination typically hinges on the threshold that defines significant self-employment activity for lending or credit evaluation purposes. When evaluating 1099 income, any income derived from self-employment reported on a 1099 form can indeed reflect the borrower's ability to repay a loan; however, lenders often look for certain thresholds to establish whether that income is substantial enough to consider it as a consistent source for repayment.

The correct answer indicates that if a borrower has at least 25% of their total income from 1099 sources, this is a clear indication of self-employment. This threshold helps lenders assess the stability and reliability of income, given the fluctuating nature of self-employed revenue streams. A minimum percentage like this helps ensure that the borrower has a significant and ongoing engagement in self-employment rather than merely an incidental income occasioned by occasional freelance work or similar activities.

This understanding is crucial for mortgage practitioners, as it influences underwriting decisions and the overall risk assessment of the loan application. Knowing that 25% marks a significant engagement level allows lenders to confidently account for the borrower's self-employed income when making lending decisions.