W-2 to 1099? Don’t Let That Job Switch Wreck Your Home Loan Dreams

So you’re out here trying to secure the bag and the house. Respect. Maybe your job offered you a switch to 1099 status—more freedom, bigger checks, fewer taxes upfront. Sounds like a win, right?

Well… maybe or maybe not if you’re trying to get a mortgage.

If you’re planning to buy a home in anywhere in Texas in particular Katy, Sugar Land, The Woodlands, Cypress, Richmond, Spring, Tomball, or Fulshear, that move from W-2 to 1099 could pause, delay, or flat-out destroy your mortgage prequalification—unless you know the game.

Let’s talk about how this affects your loan chances and what you can do to keep the dream alive. 🏡

🧾 W-2 vs. 1099: Why It Matters for Your Mortgage

Here’s the deal. Mortgage lenders don’t just want to see income—they want to see consistent, documentable, stable income. W-2 income is considered stable because it’s predictable and easy to verify with pay stubs and tax returns.

But 1099 income? That’s self-employment, baby. And when it comes to mortgages, that changes everything.

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😬 Why Switching to 1099 Mid-Homebuying Can Wreck You

If you go from a W-2 job to a 1099 position, lenders now consider you self-employed. And guess what that means?

• You typically need two years of 1099/self-employment income to qualify for most mortgage programs.
• Lenders will want to see tax returns, profit and loss statements, and maybe even bank statements.
• Your income might be averaged over the past 24 months—so if you just started your 1099 hustle, that average is zero.

Translation: Your prequalification just hit a red light. 🚦

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👀 Are There Exceptions?

Yes! But only if the stars align:

✨ If you have at least 12 months of 1099 income in the same line of work and you were previously W-2 in the same field, some lenders may give you a pass.

✨ Some non-QM loan programs (non-qualified mortgages) might let you in the door using bank statement loans or 1099-only loans—but expect higher rates and stricter terms.

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✅ Best Practices Before You Make the Switch

Thinking of going 1099 but still want that dream home? Do this first:

1. Get prequalified before you switch.
   Let the lender base your prequalification on your current W-2 income.
2. Close on the home first, then make your move.
   If possible, hold off on the switch until you have keys in hand.
3. Talk to a mortgage pro (ahem… that’s me 👋🏽).
   I’ll tell you how the move will impact your homebuying timeline and financing options.

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🏡 Let’s Get You Home-Ready—The Smart Way

I’m Kory Small, a mortgage broker based in Katy, Texas, helping folks across Houston suburbs and across Texas stay ready, steady, and locked in when it’s time to buy a house or home.

💻 Use my Home Affordability Calculator to find out what you can really afford before your income situation changes.

📲 Ready to have a real convo about your next steps? Click here to start a discussion with me. No pressure, just real talk.

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Final Word

Going from W-2 to 1099 is a flex, but when it comes to mortgage loans, it can also be a flop if you’re not strategic. Don’t let a career upgrade block your homeownership blessings.  Get the info. Make the plan. Own the house.  Let’s get it.