Buying your first home when you are paid on a 1099

A person paid on a 1099 can get a mortgage. The income proof simply runs on a different road than it does for someone with a pay stub: the CFPB regulation, Appendix Q to Regulation 1026 (version dated February 17, 2021), states that self-employment income "is considered stable, and effective, if the consumer has been self-employed for two or more years", and the thing the lender reads to learn that number is your two most recent tax returns. This guide follows the order you will actually meet: proving income, credit score, mortgage insurance, how to compare lenders, the cash you need ready, and the scam that hits on closing day.

What documents prove 1099 income#

Tax returns prove it, not pay stubs. CFPB writes on its paperwork page (updated December 12, 2024): "If you are self-employed or have irregular or seasonal income, you need to provide more extensive documentation of your income. Requirements vary based on the lender and your specific situation."

CFPB's Appendix Q lists those documents outright:

• Signed, dated individual tax returns for the two most recent years, with all applicable tax schedules
• If you set up a corporation, an S corporation or a partnership: signed copies of the federal business income tax returns for the last two years, with all applicable tax schedules
• A year-to-date profit and loss (P&L) statement and balance sheet

On top of that comes the packet every applicant files, from CFPB's own list (December 12, 2024): a pay stub for the last 30 days and W-2 forms for the last two years if you also hold a job, signed federal tax returns for the last two years, documentation of any other income, the two most recent bank statements, documentation for the down payment money with at least two months of history, a gift letter if the down payment is a gift, a driver's license or state ID, and a Social Security number. The form the lender hands you to fill in is the Uniform Residential Loan Application, usually called Form 1003.

If you have never filed as a self-employed person, start at filing taxes when the salon gives you a 1099 first. According to the IRS self-employed tax center (updated June 28, 2026), you report the profit on Schedule C, calculate self-employment tax on Schedule SE, and "have to file an income tax return if your net earnings from self-employment were $400 or more." Without those two returns, there is nothing for a lender to read.

You can also pull the very transcript the lender will see, so nothing surprises you. The IRS Get Transcript page (updated June 27, 2026) says transcripts sent by mail arrive "in 5 to 10 calendar days", requested on Form 4506-T or Form 4506-T-EZ, or by phone at 800-908-9946. The service is free, so do not pay anyone to do it for you.

What credit score does FHA accept#

FHA accepts lower scores than a conventional loan does, and the dividing line is 580. HUD's housing counselor training, Module 2.2, prints this table under the heading "the most current minimum lending requirements for an FHA-insured loan". The page footer of that document reads Last Update: 9/2022, and the mortgage insurance chart in the same document is marked "Information up to date as of March 20, 2023":

Those are the figures as HUD published them in the 2022 to 2023 material. This year's restatement on hud.gov could not be retrieved while this guide was written, so treat the table above as the mark to prepare against, then confirm it with an FHA-approved lender. The 3.5% down payment does have newer confirmation: CFPB's FHA page (page last modified June 30, 2025) says FHA loans "allow for down payments as low as 3.5 percent", allow lower credit scores than most conventional loans, have a maximum loan amount that varies by county, and that "mortgage insurance is required for all FHA loans."

The sentence HUD prints above the table is worth keeping too: "Though credit approval is subject to lenders, FHA allows financing options for borrowers with lower credit scores." FHA does not lend you the money. According to CFPB (last reviewed February 2, 2024), FHA sells mortgage insurance to FHA-approved lenders to protect them if the homeowner defaults, and "the cost of the mortgage insurance is passed along to the homeowner." Each lender is still free to set its own bar above the FHA minimum. That same page gives HUD's phone number for questions: (800) 225-5342.

One small definition with money attached: HUD (Module 4.1, last updated 02/2024) says first-time homebuyers are "those who have not owned a home for at least three years", and that this group may be eligible for homebuying programs with down payment assistance. So having owned a home long ago does not necessarily rule you out.

Where to start when you have no credit history#

Start by opening one small credit account that reports, because your problem is not a bad score but the absence of one. CFPB (page reviewed September 2, 2026) describes a credit score as "a prediction of your credit behavior" and says most scores run on a scale of 300 to 850. HUD (Module 1.2, last updated 4/2025) adds the detail: FICO is the most commonly used scoring model for lending decisions in the US, and you have a FICO score at each of the three agencies, Equifax, Experian and TransUnion. For a mortgage, CFPB (reviewed December 31, 2024) says most lenders pull FICO scores from all three bureaus, "typically using the middle score to determine rates".

A great many people in this community sit in exactly this gap. CFPB (release dated May 5, 2015) reported that "about one in 10 Americans can be considered credit invisible because they do not have any credit record", plus about 8 percent of adults whose records exist but cannot be scored, and that "about 15 percent of Black and Hispanic consumers are credit invisibles compared to 9 percent of White consumers." A later CFPB post (March 1, 2017) gave a combined figure: "more than 45 million American adults have no credit score because they have limited or no credit history."

The way out, following HUD's counselor list and CFPB's list (reviewed September 13, 2024):

• A secured credit card. HUD (Module 1.2, 4/2025) describes it: an upfront deposit "usually about $300-$1000", a credit limit normally equal to that deposit, used like an ordinary card, and every on-time payment gets reported.
• A credit builder loan. Borrow from a bank or credit union, make small payments over 6 to 24 months, and receive the money at the end.
• A retail, warehouse or gas station card, with a low limit.
• Does not build credit: debit cards and cash, prepaid cards, payday loans, and "buy here, pay here" auto loans.

What matters most is paying on time. CFPB (reviewed December 12, 2024) writes that "most credit scores consider repayment history as the number one factor for building a strong credit score", recommends "keeping your use of credit at no more than 30 percent of your total credit limit", and says "paying off the balance in full each month helps get you the best scores." HUD (Module 1.2, 4/2025) prints the actual weights: account history 35%, utilization rate 30%, age of accounts 15%, credit inquiries 10%, and credit mix 10%.

Before you apply, pull the free reports and fix errors. CFPB (last reviewed August 28, 2023) says you "have the right to request one free copy of your credit report each year from each of the three major consumer reporting companies" at AnnualCreditReport.com, or by calling (877) 322-8228. CFPB's home loan toolkit (2015 edition) is specific about timing: "Correcting errors on your credit report may raise your score in 30 days or less. It's a good idea to correct errors before you apply for a mortgage." The same toolkit says "if your credit score is below 700, you will likely pay more for your mortgage", and that some people who improve their credit "save $50 or $100 on a typical monthly mortgage payment."

Two things to avoid in the months before applying. First, CFPB (December 31, 2024) advises "don't apply for a lot of new credit in a short time, especially if you are getting ready to get a mortgage." Second, do not let fear of hurting your score stop you from asking several lenders for prices: the CFPB toolkit (2015) says scoring models let you shop "generally between 14 days and 45 days" with little or no impact, CFPB's comparison page says multiple mortgage credit checks inside a 45-day window count as a single inquiry, while HUD's counselor training (Module 4.1, 02/2024) uses a 30-day window. Those two figures genuinely differ, so the safe move is to fit all your rate shopping inside 30 days.

How FHA MIP differs from PMI, and why that difference costs money#

It differs because PMI has an end date fixed by law and FHA MIP is not covered by that law. Both are insurance you pay to protect the lender, not to protect you. HUD (Module 2.2, 9/2022) puts it plainly: "A mortgage insurance premium is paid by you, the borrower, to protect the lender if you stop paying your mortgage."

Both charges exist on every FHA loan. What this guide will not do is print a percentage for them:

Why no FHA percentage appears above. FHA sets both charges by mortgagee letter, so they move on HUD's schedule rather than a fixed one, and they have moved before: the last change took effect on March 20, 2023. The only figures available to this guide come from HUD's counselor training material, whose chart is marked "Information up to date as of March 20, 2023" and whose page footer reads "Last Update: 9/2022". hud.gov itself refuses every attempt to reach it, so the current figure could not be confirmed on September 22, 2026. A percentage that may be three years stale is worse here than no percentage, because you would budget against it. Ask an FHA-approved lender in writing for the current UFMIP and annual MIP, or call HUD on (800) 225-5342. The conventional PMI range above is CFPB's, and it describes what the market charges rather than what a government instrument sets, which is why it stays.

CFPB (last reviewed August 28, 2026) confirms the required part: "FHA mortgage insurance is required for all FHA loans", and it "includes both an upfront cost, paid as part of your closing costs, and a monthly cost, included in your monthly payment." If you do not have the cash for the upfront fee, the page says you are allowed to roll the fee into the mortgage instead, and states the consequence in the same breath: "your loan amount and the overall cost of your loan increases." The same page notes that conventional PMI is "most private mortgage insurance is paid monthly, with little or no initial payment required at closing."

This is the part to read slowly. On a conventional loan, CFPB (last reviewed August 28, 2026) sets out three cancellation rights: you have the right to ask your servicer in writing to cancel PMI on the date the principal balance is scheduled to fall to 80 percent of the original value of the home; the servicer must automatically terminate PMI on the date the balance is scheduled to reach 78 percent; and it must end PMI the month after you reach the midpoint of the loan's amortization schedule, which for a 30-year mortgage is after 15 years, regardless of the balance.

HUD (Module 2.2, 9/2022) works an illustration on a $100,000 home at 6% interest to show the size of this, and its conclusion is the part worth carrying: on the same house, the FHA payment with 3.5% down runs higher each month than the conventional one with 10% down, and most of that gap is the insurance rather than the interest. The dollar figures in that illustration are built on the 2022 to 2023 charges, so they are not reproduced here, for the same reason the percentages are not. HUD tells its counselors directly: "The point to remember is that mortgage insurance can cost you hundreds or even thousands of dollars a year. Calculations are complex, so, again, you will want to ask your lender to estimate mortgage insurance costs."

Choosing a lender: ask at least three for a Loan Estimate#

Asking several lenders is the cheapest and most profitable thing in the whole process, and most buyers skip it. CFPB research (published May 15, 2018) found that "more than 30 percent of borrowers reported not comparison shopping for their mortgage" and "more than 75 percent of borrowers reported applying for a mortgage with only one lender", and that "failing to comparison shop for a mortgage costs the average homebuyer approximately $300 per year and many thousands of dollars over the life of the loan." CFPB's comparison page puts the saving at $600 to $1,200 per year from getting offers from multiple lenders, citing Freddie Mac research from 2023. The CFPB toolkit (2015) says it shortest: "Get at least three offers, in writing, so that you can compare them."

First, sort out two words that get mixed up. HUD (Module 4.1, 02/2024) describes pre-approval as a lender committing to a fixed loan amount "based on a review of a completed loan application, credit reports, debt, savings, and a review by an underwriter", while pre-qualification is just discussing your financial history with a lender, with "generally no cost, underwriting process, or commitment". CFPB (last reviewed December 5, 2023) warns against trusting the label: "Lenders' processes vary widely, and the words they use don't tell you much about a particular lender's process." The question to ask is what they actually verified.

Then come the two documents that decide everything, and two separate three-day windows:

1. The Loan Estimate. CFPB (page dated August 9, 2024) describes it as a three-page form you receive after applying, and says "the lender must provide you a Loan Estimate within three business days of receiving your application." Apply at three lenders and you have three of these to set side by side. The CFPB toolkit (2015) names where to compare: Total Loan Costs, in Section D at the bottom left of page two.
2. The Closing Disclosure. CFPB (last reviewed May 2, 2023) describes it as a five-page form with the final figures, and says "the lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan." Those three days exist so you can lay it beside the Loan Estimate and check it line by line, especially the APR and whether a prepayment penalty has appeared.

Those three days restart in three situations, according to HUD (Module 4.1, 02/2024): "if the APR is inaccurate, the loan product changes, or a prepayment penalty is added, then the lender must provide new disclosures and allow an additional three business days prior to closing." Know this so that nobody can rush you into signing.

Some costs are allowed to move between the two documents and some are not. CFPB (last reviewed September 11, 2024) splits them three ways: fees paid to the lender, the mortgage broker or an affiliate of either for a required service cannot increase at all; recording fees and fees for required services where you chose a provider from the lender's written list can increase by up to 10%; while prepaid interest, property insurance premiums and initial escrow account deposits can change without limit. These limits fall away if there is a documented change in circumstances.

How much cash you need ready#

You need two separate amounts: the down payment and the closing costs. CFPB (last modified October 1, 2025) writes that "in most cases, you need a down payment of at least 3 percent of your target home price. Many loan types and lenders require 5 percent down or more."

On closing costs, two agencies give two different figures, and this guide leaves them as they are:

• CFPB, page last modified October 1, 2025: "Typically, closing costs (not including your down payment) range from 2-5% of the home purchase price."
• HUD, counselor training Module 4.1, last updated 02/2024: "While closing costs often range from 3 to 4% of the purchase price of the home, they can be lower or higher, depending on geographic region or loan type."

Those two ranges do not line up. When you budget, save to the higher figure and be glad if the real one is lower. HUD (Module 4.1, 02/2024) defines closing costs as "fees for final property transfer that are not included in the price of the property", and lists the usual ones: loan origination fees, discount points, appraisal fee, survey, title insurance, legal fees, real estate professional fees, and prepayment of taxes and insurance. That document also notes that "not all closing costs are due at closing", with some due at the time of application. CFPB's list (last reviewed September 11, 2024) adds appraisal fees, tax service provider fees, title insurance, government taxes, and prepaid expenses such as property taxes, homeowners insurance and interest until your first payment is due.

Who pays? CFPB (September 11, 2024) writes that "when you are buying a home you generally pay all of the costs associated with that transaction. However, depending on the contract or state law, the seller may end up paying for some of these costs." The same page warns that you can still pay fees indirectly, through a larger loan or a higher interest rate, even when you hand over no cash on the day.

One yardstick for judging what you can carry, from the CFPB toolkit (2015): "A mortgage lending rule of thumb is that your total monthly home payment should be at or below 28% of your total monthly income before taxes."

Where to look for down payment help#

Look on HUD's site, state by state, because the programs differ in every state. HUD's counselor training (Module 2.2, 9/2022) gives the exact path: go to hud.gov/states, select your state on the State Information page, then on your state page select "Learn about Homeownership", then find "Assistance Programs". This guide names no individual program, because that list changes by state and by year, and HUD's page is where the correct version lives.

The same document names the other doors to knock on for assistance money: a local or state public housing authority, a state housing division, community action agencies and other nonprofits such as Habitat for Humanity, the Department of Veterans Affairs, government-sponsored bank cooperatives such as the Federal Home Loan Banks, and the Community Development Block Grant program. USAGov (last updated April 27, 2026) likewise points buyers to find and contact their state housing finance agency, the HFA.

Family money counts too. HUD (Module 4.1, 02/2024) says clients without enough savings may be able to use loans that allow "down payment funds to come from other sources. Sources may include gifts from family or friends or down payment assistance from a homebuying program."

Can your immigration status get you turned down#

A lender may not refuse you because of your national origin, and the example violation HUD itself uses to train counselors is an immigrant family. HUD's training (Module 4.1, last updated 02/2024) describes the Equal Credit Opportunity Act (ECOA) as the "federal law requiring lenders to make credit available equally without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs." The example violation HUD prints right below it: "A lender denied a loan to an immigrant family. When the family inquired about the reason for denial, the lender claimed that he could not approve loans for homebuyers who have lived in the country less than five years." HUD notes the law is enforced by the Federal Trade Commission, and that complaints are filed at www.ftc.gov/complaint.

As for FHA's own rule on residency status, this guide does not print it, because it could not be verified. The HUD pages covering it were all unreachable while this guide was written (checked September 21, 2026), and this is an area of policy that changed recently. A wrong sentence here would hurt the reader, so the honest answer is this: ask an FHA-approved lender or a HUD-approved housing counselor, and get the answer in writing before relying on anything you were told. What can be said for certain is that CFPB's application packet (December 12, 2024) asks for an identity document and a Social Security number, but that is a paperwork fact, not a rule about immigration eligibility.

The closing-day scam that can take the whole down payment#

Scammers impersonate someone you already trust in the deal and send fake wiring instructions. CFPB describes it: "Scammers send spoofed emails to homebuyers, posing as the real estate agent, settlement agent, legal representative or another trusted individuals, with false instructions for wiring closing funds." The same piece cites FBI figures: reports rose 1,100 percent between 2015 and 2017, with an estimated loss of nearly $1 billion in real estate transaction costs in 2017 alone.

CFPB's five steps, to be done before closing day:

1. Identify two trusted individuals in advance. Write down the primary contact information for your real estate and settlement agents, the two people who can safely confirm your payment and closing details. Consider choosing a code phrase that only they will know.
2. Beware of last-minute changes to the closing process. These changes often come by email and often appear to be from your own real estate or settlement agent.
3. Avoid using phone numbers or links in an email. Call using only the numbers you saved earlier, and do not click links or download attachments without confirming first.
4. Do not email financial information. CFPB states plainly that email is never a secure way to send sensitive financial or personal information.
5. Be mindful of phone conversations. Scammers may also call and ask you to verify your personal information.

If you already sent the money and then realize it was a scam, timing is everything: CFPB says to contact your bank or wire-transfer company immediately to stop or reverse the transfer, and to file a complaint through the FBI's Internet Crime Complaint Center at ic3.gov. How to recognize the other scams aimed at this community is covered in how to spot a scam and report it.

There is one more set of warnings, from HUD (Module 4.1, 02/2024), about predatory lending: "Each year, misinformed homebuyers, often first-time purchasers, fall victim to predatory lending." The sign HUD names is the pressure line, "If you don't decide today, you will lose this great opportunity!" And two instructions HUD repeats: review paperwork carefully before signing, and "never sign a blank document or a document containing blanks."

What to do next#

1. Count the years you have been self-employed and filing. Under two years and you are short of the Appendix Q mark (version dated February 17, 2021), so use the remaining time to prepare. See filing taxes when the salon gives you a 1099 if the books are not in order.
2. Pull all three free credit reports at AnnualCreditReport.com and fix errors before you apply, because CFPB says corrections may raise your score in 30 days or less.
3. If you have no credit file, open a secured card or a credit builder loan this month, and pay it on time every month.
4. Look up the FHA loan limit for your own county using CFPB's instructions, rather than a number you heard from someone.
5. Call (855) 411-2372 or use CFPB's counselor finder to book a HUD-approved housing counselor, before you pay any private service.
6. Go to hud.gov/states, pick your state, then "Learn about Homeownership", then "Assistance Programs", to see what down payment help your state offers.
7. When you apply, apply at three lenders or more inside the same 30-day window, then compare the three Loan Estimates at Total Loan Costs, Section D on page two.
8. Before signing, ask the lender in writing how long FHA MIP lasts on your loan, and use the full three business days the law gives you to hold the Closing Disclosure beside the Loan Estimate.