Buying a house in Dallas on 1099 income: what does the lender look at?

• If you're paid on a 1099, a lender treats you as self-employed, even if you have only one client.
• Fannie Mae's guide, which many lenders follow, generally calls for a two-year history of self-employment and two years of signed returns, or IRS transcripts.
• The lender qualifies you on the net profit on your returns. The write-offs that lower your tax bill also lower the income the lender counts.
• Federal rules let lenders verify income with tax returns, IRS transcripts or bank records. That's why bank statement loans exist, though not every lender offers them.
• Don't change how you earn or how you file without talking to me first. The conversation comes before the house hunt.

With a W-2, a lender sees a set salary and confirms it with your employer. With a 1099, there's no employer to vouch for what you make each month. Your tax return is the proof.

That income usually lands on Schedule C, the form the IRS uses for profit or loss from a business you run yourself. You report what came in and subtract your business expenses: the vehicle, the equipment, the phone, the software, the home office. What's left is net profit.

Here's what that means for you: if you write off a lot, you pay less tax, and that's legitimate. But on paper you look like you earn less, and the lender qualifies you on paper. That's how someone who's doing well walks out of a bank hearing "you don't qualify for as much" and can't figure out why.

You didn't do anything wrong. Your file was looked at one way. There are others.

1. Your last two years of personal returns, complete and signed, with every schedule. Fannie Mae also accepts IRS transcripts. If you have a separate company, the lender may ask for its returns too.
2. Your 1099 forms for those years, so the lender can see where the income comes from.
3. Bank statements showing your savings and where your down payment and closing costs are coming from.
4. Proof the business is still active: a license, a registration, a letter from your CPA, or whatever your lender asks for in your situation.
5. The lender's analysis. From those papers, the lender works out what you earn based on your returns. Fannie Mae publishes a cash flow analysis form for exactly that.
6. The pre-approval letter. With real numbers, the lender tells you how much you're approved for. That letter is what sets your price point. No touring before the letter.

There are exceptions worth knowing. Under Fannie Mae's guide, if your business has been around for five years, a lender can sometimes use just one year of returns. And if you've been self-employed less than two years but at least a full year, that income can still count when you were earning the same or more doing similar work before. Your lender confirms whether either applies.

If you want your situation reviewed before you look at a single house, book 30 minutes at veronicayeary.com/en/book. It's a conversation about you, not about listings.

That's where bank statement loans come in. The federal ability-to-repay rule says a lender has to verify your income with reliable third-party records, and its examples include tax returns, IRS transcripts and records from financial institutions. Some lenders use those bank records, reviewing several months of deposits to understand what comes in.

What to know about these loans:

• Not every lender offers them, and the ones that do set their own rules.
• The terms can differ from a conventional loan. Your lender explains theirs, in writing, before you decide anything.
• They aren't "the loan for people who can't qualify." They're another way to document income, built for people who work for themselves.

My part is connecting you with a lender who handles these cases every day, and staying in the conversation so you never sign anything you don't understand. I don't lend money and I don't approve anyone.

• Touring homes before talking to a lender. You fall for a house, make an offer, and only then learn what you're approved for. Letter first, houses second.
• Believing 1099 earners can't buy. People hear that because one bank reviewed them for one type of loan. There's more than one way to document income.
• Changing how you file right before buying, with no plan. Cutting or adding write-offs, opening a new entity, or switching lines of work can change what a lender counts. Don't change how you earn or file without talking to me and your CPA first.
• Moving money without a paper trail. Large unexplained deposits, cash in and out, transfers between business and personal accounts. The lender will ask where every dollar came from. Have the explanation ready.
• Going bank to bank. Each one asks for the same documents and reviews you one way. One organized conversation with the right lender saves weeks.

Picture a consultant in Dallas who's been on her own for years. Several companies pay her on 1099s. Business is good, and her CPA helps her deduct everything the law allows.

She goes to her bank and hears that, based on her returns, she's approved for far less than she expected. She gets discouraged and thinks about waiting another year.

Before giving up, she sits down with a lender who works with business owners. The lender reviews her returns, also reviews her bank statements, and lays out two options with their terms, in writing. She picks one with her CPA beside her. Only then does she start looking at homes.

That's an example, not a real client. Your situation may be different, and the lender confirms what applies.

• Your last two returns: filed and signed. If one is missing, that's step one.
• Your IRS transcripts: you can request them at irs.gov. They show what the IRS has on file and should match your copies.
• Your net profit, not your gross: that's the line the lender reads first.
• Separate accounts: business on one side, personal on the other, with deposits you can explain.
• Your down payment and closing cost funds: where they sit and how long they've been there.
• Where you want to buy: in Dallas, check the county appraisal district and the official school district map before you offer. The Dallas area page shows where to start.

When Veronica Yeary works with business owners in Dallas-Fort Worth, this list gets checked before the first showing.

Can I buy a house in Dallas if I'm paid on a 1099?

Yes, there are options. To a lender you're self-employed, so they usually ask for two years of returns and qualify you on net profit. Some lenders also review bank statements. The lender confirms which option fits you.

How many years of tax returns will the lender want?

The general rule in Fannie Mae's guide is two years of signed returns, or IRS transcripts. If your business has existed for five years, one year can be enough in some cases. Your lender tells you which applies.

Why does the lender say I make less than I do?

Because they qualify you on the net profit on your returns, after your write-offs. Writing off expenses is fine, but it shows a lower income on paper. That's why it pays to talk to a lender before you change anything.

What is a bank statement loan?

It's a loan where the lender reviews several months of your deposits to understand your income, instead of relying only on your returns. Federal rules allow income to be verified with bank records. Not every lender offers it, and the terms can be different.

Should I stop taking write-offs so I can buy?

Don't change how you earn or file without talking to me and your CPA first. Sometimes there's another way to qualify without touching your taxes. Your CPA confirms what makes sense for you.

Before you see a single house, you need to know how your income reads on paper and which options you have. That's a 30-minute conversation.

Let's talk for 30 minutes about your situation, not houses: veronicayeary.com/en/book

Call or text 469-441-8890 · veronica@veronicayeary.com

Veronica Yeary, Realtor®, CRS, ABR, SRS, CIPS · All City Real Estate DFW · Dallas-Fort Worth. This isn't legal, tax or loan advice: your lender and your CPA confirm your case.