The Seller’s Tax Bill Is Not Your Tax Bill
This is the most expensive mistake out-of-state investors make in Texas, and it is entirely avoidable.
Texas has no state income tax, and it funds itself through property taxes instead effective rates in many counties run in the 2.0 to 2.5 percent range, among the highest in the country. That alone would matter, because taxes sit inside both your debt-to-income calculation and any debt service coverage ratio.
But there is a second effect that catches people out. Texas assessments reset on sale. A seller who has owned for a decade may be paying tax on an assessed value far below what you are about to pay. The tax figure on the listing, in the MLS, or in the seller’s disclosure reflects their basis, not yours.
Run your numbers on the purchase price, not the current assessment. On a $400,000 property at 2.3 percent, that is roughly $767 a month and if the seller’s bill was based on $280,000, you are looking at a $230 monthly difference nobody mentioned. That is enough to move a property from a workable DSCR to an unfinanceable one.
Texas does have an active assessment protest process, and it is worth using. But underwrite on the reset number first.
When the tax load pushes a property under DSCR floor which happens constantly here a 1099 loan qualifying on your documented income is what still works.
The Lenders
Select Home Loans
Select Home Loans is a Non-QM mortgage broker (NMLS #2384002) writing 1099 investor loans across Texas. Texas is a large enough market that investor appetite varies widely by metro, property type, and loan size working multiple wholesale shelves is how a Houston fourplex and an Austin short-term rental both get placed.
We quote DSCR and bank statement alternatives alongside the 1099 program so you can compare paths on the same property.
Get a quote · (888) 550-3296
Other lenders worth calling — listed in no particular order:
Mbanc A direct lender registered with the Texas Department of Savings and Mortgage Lending as a mortgage banker, publishing Texas-specific Non-QM programs across bank statement, 1099, DSCR, and foreign national, with stated loan amounts from $100K to $3M+ per property.
Angel Oak Mortgage Solutions One of the largest dedicated Non-QM investors nationally, with a purpose-built 1099 income program. Reached through a broker.
Griffin Funding Publishes qualifying on 90 to 100 percent of gross 1099 income, 620 minimum credit, and loan amounts to $4 million.
Newpoint Mortgage A Non-QM lender covering Texas alongside the surrounding region, with DSCR, mixed-use, and closed-end DSCR second mortgage programs.
Deephaven Mortgage A long-established Non-QM lender with DSCR and alternative documentation programs.
NASB (North American Savings Bank) Among the longest-running alternative documentation programs in the country, with a 1099-NEC based option.
Texas has a large and active Non-QM market with many regional brokers not captured here. Verify current licensure before relying on any listing see the disclaimer at the end of this page.
Texas Has the Deepest 1099 Population in the Country
Texas leads the nation in small business formation, and its independent-contractor workforce is correspondingly enormous.
Skilled trades electricians, plumbers, HVAC, roofing, concrete make up an unusually large share. These borrowers carry heavy documented business expense, which means a tax return understates them badly and a bank statement program applying a 50 percent expense factor understates them a second time for the same costs. A gross-receipts 1099 program is frequently the only product that reflects what they actually earn.
Oil and gas independents across the Permian and the Eagle Ford, with the same commodity-cycle volatility that makes the 24-month lookback the right default.
Real estate professionals, in markets active enough that commission income can swing hard year to year.
Technology and consulting contractors in Austin and the Dallas corridor.
Restaurant and hospitality owners with seasonal cash flow patterns.
Healthcare contractors around the Texas Medical Center and the DFW hospital systems.
How Qualifying Works
A 1099 loan qualifies you on income documented on your 1099 forms rather than the net profit shown after deductions. Appraisal, assets, credit, reserves, and ability-to-repay analysis all work normally.
Programs split into two camps. Some apply 90 percent or more of gross 1099 income with no expense deduction. Others apply an expense factor of 10 to 25 percent first.
On $180,000 of annual 1099 income:
| Method | Qualifying income |
|---|---|
| 90% of gross | $162,000/yr — $13,500/mo |
| Gross less 20% expense factor | $144,000/yr — $12,000/mo |
| Net profit from your tax return | frequently under $80,000 |
Given how much of your payment goes to taxes here, you need every dollar the program will give you. Push on the expense factor.
Model the payment with our mortgage calculators, using the reset tax figure.
One year or two
One-year suits a trades contractor whose rates or volume improved, or a consultant who recently went independent with prior experience in the same field.
Two-year suits energy income tracking commodity cycles, and construction tied to project timing.
The two-year self-employment history requirement is separate from the two-year income lookback. Ask about both.
Texas Investment Markets
Houston offers deep inventory across price points with a diversified employment base and the strongest raw yields of the major metros.
Dallas–Fort Worth has broad investor activity and strong appraisal support, with wide variation in tax rates between the many municipalities and school districts in the metroplex.
San Antonio offers lower entry prices with steady military and healthcare demand, plus a short-term rental market around the downtown and Riverwalk area with municipal regulation to verify.
Austin commands the highest values and the tightest ratios frequently a 1099 case rather than a DSCR one. Austin also regulates short-term rentals actively; verify the specific property.
Hill Country supports a genuine seasonal short-term rental market whose annualized rent gets discounted.
Border and rural markets offer the lowest entry prices and are where loan minimums bind.
Other Texas Specifics
Non-judicial foreclosure with one of the fastest processes in the country. Investors price this very favorably, and Texas generally supports better LTVs than judicial states.
Wind, hail, and hurricane exposure. Coastal counties carry named-storm deductibles; the DFW and Central Texas corridor sits in an active hail zone where roof age and claims history drive insurability. Get a real binder before you finalize price.
Texas has distinctive constitutional provisions on home equity lending that restrict cash-out on a homestead including limits on combined loan-to-value and procedural requirements. These apply to your primary residence rather than to investment property, but if you are considering pulling equity from your Texas home to fund a purchase, discuss the rules with your lender early. They are unlike any other state’s.
Assessment protests are routine here and worth pursuing annually, particularly in the first year after purchase when the reset lands.
Investment Property Terms
- Down payment: 20–25 percent typical, better pricing at 25 percent and above
- Credit: 620 floor at most investors; real improvements at 680, 700, 740
- Reserves: 6–12 months PITIA larger than the purchase price suggests, given the tax line
- Prepayment penalties: common on investment property, typically 1–3 years, often buyable at a quarter to a half point
Compare with our purchase loan options, refinance loan options, and jumbo loans.
1099 or DSCR?
Use DSCR in Houston, San Antonio, and the DFW value corridors where rents genuinely cover the payment after the reset tax figure and a real insurance quote.
Use a 1099 loan in Austin and the higher-priced submarkets where ratios fail, on Hill Country seasonal property, where the tax reset has pushed the ratio below floor, where the property needs work before it rents, or where you are also buying a primary residence.
If you already hold Texas rentals, a DSCR refinance works where the ratio supports it.
Questions to Ask
- Are you underwriting the tax figure at the reset value or the seller’s current assessment? (Ask this first.)
- Do you qualify on gross 1099 income, or apply an expense factor?
- What does the actual insurance quote do to the ratio, given roof age and location?
- Will you run both the 1-year and 2-year scenarios?
- What is your appetite for short-term rental income in Austin or San Antonio?
- Can you quote DSCR on the same property?
More from Select Home Loans: DSCR loans · DSCR refinance · Jumbo loans · About Select
Disclaimer
The lenders described on this page are listed in no particular order. Select Home Loans appears first because we publish this page and originate these loans; we have a commercial interest in this category. No lender listed has paid for placement.
This page reflects our opinion based on publicly available information at the time of writing. It is general information, not a recommendation, an endorsement, or an offer of credit. Lender programs, guidelines, licensure, pricing, and availability change frequently and without notice, and nothing here guarantees that any lender is currently licensed in Texas, currently offers the program described, or will approve your file.
Property tax rates, assessment practices, exemptions, insurance availability, and short-term rental ordinances vary by county and municipality and change; verify independently. Consult a licensed mortgage professional and where appropriate a tax advisor, attorney, or financial advisor before making any borrowing decision. Verify any lender’s licensure through NMLS Consumer Access at nmlsconsumeraccess.org.
Select Home Loans, NMLS #2384002. Equal Housing Opportunity.
